Broker’s call: RR Kabel (Buy)

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Target: ₹2,151

CMP: ₹1,454.10

We downward revise our FY25/FY26/FY27E earnings estimates of RR Kabel by 14.2/1.1/1.2 per cent on account of weak margins in W&C, subdued volume growth and losses in FMEG segment in Q2-FY25.

RR Kabel reported moderate revenue growth of 12.5 per cent y-o-y due to soft W&C revenue growth of 11.1 per cent due to weak demand and channel destocking with fluctuation in RM prices. The company reported about 3.8 per cent volume growth in Q2-FY25 and expects healthy growth (15 per cent+) in H2FY25, driven by both W&C businesses with focused approach to capture demand from infrastructure and emerging sectors.

The company expects 8-8.5 per cent EBITDA margin in W&C segment in H2-FY25 and EBITDA breakeven in FMEG segment by Q1FY26. We expect revenue/EBITDA/PAT CAGR of 21.8/29.7/32.5 per cent over FY24-27.

According to its management, FMEG segment is expected to breakeven in early FY26 led by the focus on premium and mid-premium categories. FMEG EBIT losses have reduced due to favorable product mix and volume growth in fans & switches. The company is planning to double its power cable capacity and increase wire capacity by 20- 25% by FY25 end. Working capital days decreased to 63 days by Sep’24 from 64 days by Mar’24.