Company Update : R R Kabel Ltd by Motilal Oswal Financial Services Ltd
Earnings above estimate; OPM expands 3.4pp YoY to ~8%
* RRKABEL’s 2QFY26 earnings were above our estimates. Consolidated revenue grew ~20% YoY to INR21.6b (in line). EBITDA increased ~105% YoY at INR1.8b (~14% above estimate). EBITDA margin expanded 3.4pp YoY to ~8% (80bp above estimate). Adj. PAT increased 135% YoY to INR1.2b (~20% above estimate).
* Revenue contribution from the domestic market was ~73% in 2QFY26 vs. 76%/74% in 2QFY25/1QFY26. Net working capital days stood at 57 days as of Sept’25 vs. 56 days as of Mar’25
* We have a Neutral rating on the stock. However, we will review our assumptions following the conference call on 3rd Nov’25.
Revenue up 20% YoY; C&W margins up 4.1pp YoY
* Consol. revenue/EBITDA/PAT stood at INR21.6b/INR1.8b/INR1.2b (up 20%/105%/135% YoY and in line/+14%/+20% vs estimates). Gross margin expanded 3.0pp YoY to ~19%. Employee cost increased 13% YoY (stood at 4.7% of revenue vs. 4.9% in 2QFY25). Other expenses increased 16% YoY (stood at 6.1% of revenue vs. 6.2% in 2QFY25). Depreciation/interest cost increased ~25%/4% YoY, whereas other income increased ~134% YoY
* Segmental highlights: a) Cables and Wires: Revenue increased ~22% YoY to INR19.7b, and EBIT increased ~120% YoY to INR1.8b. EBIT margin expanded 4.1pp YoY to ~9%. b) FMEG business: Revenue declined marginally ~3% YoY at INR1.9b. The company reported a segment loss of INR117m vs. INR117m/INR71m in 2QFY25/1QFY26.
* In 1HFY26, Revenue/EBITDA/PAT stood at INR42.2b/INR3.2b/INR2.1b, which was +17%/+76%/+81% YoY vs our estimates. OPM expanded 2.5pp YoY to ~8%. Operating cash outflow stood at INR1.3b vs operating cash inflow of INR338m in 1HFY25. Capex stood at INR1.7b vs INR1.6b. Free cash outflow stood at INR3b vs INR1.3b in 1HFY25.
Highlights from the management commentary
* The C&W segment reported margin expansion, driven by better operating leverage and cost efficiencies.
* The FMEG segment delivered a stable performance despite muted demand arising from seasonal headwinds. Segment losses remained steady, indicating improved operational efficiency.
Valuation and view
* The company’s performance was above our estimates, driven by higher value realization and improved margins in the C&W segment.
* We have a Neutral rating on the stock. However, we will review our assumptions following the conference call on 3 rd Nov’25 (Concall Link).
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