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Earnings beat led by strong Cables and Wires performance

Targeting ~25% CAGR in cable volume over the next two years

* RRKABEL’s 4QFY25 earnings beat our estimate, led by higher-thanestimated revenue/margin in Cables and Wires (C&W). Total revenue increased ~26% YoY to INR22.2b (~7% beat). EBITDA grew 69% YoY to INR1.9b (~28% beat). EBITDA margin surged 2.2pp YoY to 8.8% (est. 7.3%). Adj. PAT rose ~64% YoY to INR1.3b (~33% beat).

* Management indicated strong volume growth of ~14% YoY/24% QoQ in C&W, reflecting strong demand in domestic and export markets. It is targeting a CAGR of ~25% in cable volume in the next two years, supported by capacity expansion, market share gain and higher exports. RRKABEL expects to improve OPM to double digits (1pp improvement p.a.) by FY28 vs. 6.4% in FY25. It reiterated that FMEG segment would achieve EBITDA break-even by FY26.

* We raised our FY26 EPS estimate by ~11%, as we increased revenue/margin estimates in C&W. We maintained our FY27 EPS estimate. However, volatility in RM prices and increasing competitive intensity remain key challenges. We value RRKABEL at 30x FY27E EPS to arrive at our revised TP of INR1,230. Maintain Neutral.

Revenue up 26% YoY; OPM expands 2.2pp YoY to 8.8%

* Consol. revenue/EBITDA/PAT stood at INR22.2b/INR1.9b/INR1.3b (up 26%/ 69%/64% YoY and up 7%/28%/33% vs. our estimates). Gross margin surged 1.2pp YoY to ~20%. Employee cost increased ~2% YoY (stood at 3.6% of revenue vs. 4.4% in 4QFY24). Other expenses rose 24% YoY (stood at 7.2% of revenue vs. 7.4% in 4QFY24).

* Segmental highlights: a) C&W: Revenue grew ~28% YoY to INR19.6b, EBIT rose ~47% YoY to INR1.9b, and EBIT margin surged 1.3pp YoY to ~10%. b) FMEG business: Revenue was up 13% YoY at INR2.6b. The company reported a segment loss of INR91m vs. INR194m/INR44m in 4QFY24/3QFY25.

* In FY25, revenue grew 16% YoY to INR76.2b, led by 15%/20% growth in C&W/FMEG. The C&W segment’s EBIT declined ~2% YoY to INR5.0b, and EBIT margin contracted 1.2pp YoY to 7.4%. The FMEG segment reported an EBIT loss of INR459m vs. INR685m in FY24. The company’s EBITDA increased 5% YoY to INR4.9b. OPM contracted 60bp YoY to 6.4%. Profit grew 5% YoY to INR3.1b. OCF stood at INR4.9b vs. INR3.4b in FY24. Capex stood at INR3.7b vs. INR1.9b in FY24. FCF stood at INR1.2b vs. INR1.5b in FY24.

Key highlights from the management commentary

* The industry’s revenue mix of cables and wires is 65:35, while the company’s mix is 70% wires and 30% cables. Its expansion is largely focused on cables. It is confident of achieving a revenue CAGR of ~18% in C&W.

* RRKABLE announced a fresh capex of INR12.0b to be completed in a phased manner by Mar’28. With this capex, it aims to generate revenue of INR45.0b, with an asset turnover of 3.5x.

* Net working capital stood at 56 days vs. 64 days in Mar’24. The company believes normal working capital days should be around 60.

Valuation and view

* RRKABEL surprised positively with a strong beat on both revenue and margin in C&W segment, driven by strong volume growth in cables, positive operating leverage and product mix optimization. Volatility in RM prices is a near-term challenge. While the entry of new players and capacity expansion by existing players could intensify competition in the industry in the long term.

* We estimate RRKABEL’s revenue/EBITDA/PAT CAGR of 16%/27%/22% over FY25-27. We estimate the company’s C&W segment margin at 7.6%/8.0% in FY26/27 vs. 7.4% in FY25. We estimate the company’s net debt to increase to INR8.4b by FY27 vs. INR1.1b by FY25, led by higher capex. The stock is trading fairly at 34x/29x FY26/27E EPS. We value RRKABLE at 30x FY27E EPS to arrive at our revised TP of INR1,230. Maintain Neutral.

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