Should you buy Finolex Cables ? Fundamental Analysis

Should you buy Finolex Cables ? Fundamental Analysis


Finolex is a Company founded in the year 1958 by the Chhabria Brothers. Initially setting up a Small shop for selling the Electrical Cables, then moved to Manufacturing for Industrial Cables. They started their industrial unit to manufacture PVC insulated cables especially for the Automobile sector.

On the rapid growth, the company went for the expansion and modernization in its segment. Finolex Industries Limited (FIL) was established in 1981 to manufacture Rigid PVC pipes and fittings for the Agriculture sector. In 1983, Finolex Cables were transformed into Public listed Company. The Company went in collaboration with the World's best companies in the field, it has expanded it's business to include Jelly Filled Telephone Cables, Optical Fibre and Copper Rod. Finolex has been a leading Manufacturer of Optical Fibre, Fibre Glass, Lighting and Electrical Switches Since 2000.

In 2011, the company entered into a joint venture with a Japanese Company - Sumitomo, to expand its manufacturing plant to include a 5.5 MW Solar Plant in 2014 and by 2016 to expand its plant for the Fans, Water Heaters and Switch Gears. Its products have also become Popular brands. Finolex is the leading manufacturer of Electrical and Telecommunication cables.

Finolex is one of the stocks that has given wealth to the long term investors. It is one of the Top 150 Hidden Champions in the world. The Company's major customers are Indian Railways, Metro Rail Corporations and Defense Sector.

The Market Capitalization stands with Rs. 4,200 Crore. The Book value comes around Rs. 178 and the Debt to Equity ratio is Zero. It is virtually Debt Free Company, where the Interest Coverage ratio is at 288 times. The Promoter Holding is about 36 Percent and there is no pledging of shares on Promoters side.

Sales have grown only three percent in the last 5 years and 6 Percent over a 10 year Period. The Profit growth have been 20 Percent over the past 5 years and 14 Percent in the last Ten years. The Cash Reserves were around Rs.2,688 Crore in the Balance Sheet.

The Company's Cash flow is in Positive and the 3 years Free Cash Flow were stood at Rs.179 Crore. At the end of 2019-20 Financial year, the company had a sales of Rs.2,877 Crore and the expenses of Rs.2,507 Crore. It had a net profit of Rs.356 Crore. The Return on Equity is around 16 Percent for the last 5 years.

According to the DCF valuation, the price of the stock is around Rs.220 to Rs.275 including Margin of Safety. Recently, the company has been facing Management and Competitive Challenges in its business. However it is good at its Fundamentals, will be an opportunity for the long term investors.

Note: The above information is only for the Education Purpose and not considered as a recommendation to invest.

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