RR Kabel is stock pick of the week as strong R&D, diversified product profile are driving its performance It is a beneficiary of the buoyant growth prospects of the consumer electrical industry in India
Consumer electrical company RR Kabel missed estimates in the December 2024 quarter due to a decline in volume growth in its wires & cables (W&C) segment. The revenue and PAT fell short of the Reuters-Refinitiv estimates by 5.6% and 8.2% respectively. It reported moderate consolidated revenue growth of 9% year-on-year with 7.6% growth in the W&C segment and 19.1% in the fast moving electrical goods (FMEG) segment. Also, the raw material volatility led to a 70-basis points contraction in EBITDA margins year-on-year.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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The management expects performance to improve from the March 2025 quarter onwards led by a likely improvement in domestic wire demand from infrastructure and housing sectors. In addition, a recovery in exports, normalisation in freight costs and benefits from capacity expansion will further boost performance. The company offers a diverse range of products in W&C and FMEG segments and exports to over 72 countries. It is a beneficiary of the buoyant growth prospects of the consumer electrical industry in India. The growth in the W&C segment is driven by the railways and the real estate sectors, the push towards renewable energy, and the government’s thrust on rural electrification.
On the other hand, the growing demand for energy-efficient products, premiumisation and rising disposable incomes are driving the growth of the FMEG segment. The company’s 2023-24 annual report estimates the W&C industry in India to grow at 13% CAGR between 2023-24 and 2026-27. The FMEG industry is expected to grow at a CAGR of 8% between 2023-24 and 2027-28.
There are multiple growth catalysts in both W&C and FMEG. While factors like improved product mix, cost efficiencies, strong R&D, integrated precision manufacturing facilities and expansion of distribution are imparting strength to the former, omnichannel growth, presence across price points, and high margin value-added products are supporting the latter. Moreover, a large addressable market, pan-India distribution, strong brand recognition and experienced management are some of the key strongholds of the company. Also, the company is tapping new market segments and increasing its revenue streams by diversifying its product portfolio to cater to the needs of different industries, such as power transmission, telecommunications, data centres, and automotive.
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The capex plans are on track and aim to expand copper wire production and increase the capacity of power cables and wires. The management plans to incur an additional Rs.1,200 crore of capex over the next three years, which has a revenue potential of Rs.4,000-4,500 crore. Analysts believe that the valuations are reasonable. A recent Motilal Oswal report expects its RoIC to improve to 21% in 2026-27 compared to 13% in 2023-24.
Selection methodology: We pick the stock that has shown the maximum increase in ‘consensus analyst rating’ during the past three months. The consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (1 for strong buy, 2 for buy, 3 for hold, 4 for sell, 5 for strong sell). An improvement in consensus analyst rating indicates that the analysts are getting bullish on the stock. Only stocks with more than five analysts covering them are considered. You can see similar consensus analyst rating changes during the past week in ETW 50 table.
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This story originally appeared on: India Times - Author:Faqs of Insurances
