Upgrade to Buy R R Kabel Ltd for the Target Rs.2,600 by Motilal Oswal Financial Services Ltd
Capex-led growth; channel expansion fuels market reach Cable-led growth momentum remains strong
RRKABEL continues to benefit from strong cable demand, with cable volumes growing in high teens in FY26 versus single-digit growth in wires. Management expects overall volume growth of ~16-18% in FY27, led by cables, supported by opportunities in infrastructure, data centers, renewables, and exports, with cable contribution expected to rise from ~27% to ~31% of the W&C mix over time. Exports contributed ~26% of revenue in FY26, backed by a presence across 74 countries and 57+ international certifications. It has also strengthened its market reach through over 6,000 dealers and nearly 150,000 retail touchpoints, while its IPL partnership with Kolkata Knight Riders is expected to enhance brand visibility.
FMEG nears breakeven; premiumization drives growth
The FMEG segment contributes ~10% of revenue, led by fans and lighting, while premium products such as BLDC fans and smart lighting account for ~20% of segment sales. The company continues to strengthen its portfolio through new launches under the premium ‘RR Signature’ brand and expansion into adjacent categories such as kitchen appliances and industrial air coolers. Despite a challenging demand environment, the business delivered stable performance in FY26, aided by distribution expansion and demand across key categories. It remains confident of achieving breakeven in FY27 and delivering ~20-25% revenue growth, supported by operating leverage, scale benefits, and growth in fans, appliances, switchgears, and other underpenetrated categories
Project RRISE targets growth acceleration and margin expansion
Project RRISE targets ~18% CAGR in the C&W segment and ~25% CAGR in FMEG, supported by 1.7x W&C capacity expansion, 1.8x export growth, 300bp margin improvement, and a 2.5x increase in EBITDA. To capitalize on the growing cable opportunity, it has outlined an INR12b capex plan over FY26-28E, with ~80% earmarked for cable capacity expansion and the remainder for modernization, automation, warehousing, and digitalization initiatives. The company has already invested INR3.5b, with the bulk of the capex scheduled for FY27. The cable-led scale-up is expected to drive both growth and profitability, with management targeting W&C margin expansion to ~10.5% by FY28E. 1.3pp improvement has already been achieved, while FY27 margin guidance stands at ~9.5%, supported by operating leverage, improved product mix, premiumization, export, and efficiency.
Valuation and view
RRKABEL witnessed an uptick in C&W’s performance during FY26, supported by strong volume growth (~16% YoY) and margin expansion (through initiatives under project RISE). The C&W segment’s EBIT margin expanded to 8.9% vs 7.4% in FY25. Additionally, lower EBIT loss from the FMEG business supported the company’s overall operating performance. We estimate the strong revenue growth momentum to continue, led by strong demand. We estimate RRKABEL’s revenue/EBITDA/PAT CAGR at 21%/29%/31% over FY26-28. We estimate OPM at 8.9%/9.3% in FY27/FY28 vs. 8.1% in FY26. We value RRKABEL at 35x FY28E EPS to arrive at a revised TP of INR2,600 and upgrade the rating to BUY.
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