X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Finolex Cables: JFTC, asset or liability? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 20, 2002

    Finolex Cables: JFTC, asset or liability?

    With advent of the new economy, one expected jelly filled telecom cable (JFTC) manufacturers to be laggards in the telecom equipment industry. However, Finolex Cables Ltd. (FCL) has outperformed industry peers, especially optic fibre cable manufacturers. With optic fibre (OF) prices turning unremunerative Aksh Optifibre Ltd. and Sterlite Optical Technologies Ltd. have reported sharp slump in sales and complete erosion in profits.

    (Rs m) 1QFY02 1QFY03 Change
    Net Sales 1,068 953 -10.8%
    Other Income 11 30 174.1%
    Expenditure 864 787 -8.9%
    Operating Profit (EBDIT) 204 166 -18.7%
    Operating Profit Margin (%) 19.1% 17.4%  
    Interest 34 27 -20.4%
    Depreciation 56 58 3.4%
    Profit before Tax 125 111 -11.5%
    Tax 24 19  
    Profit after Tax/(Loss) 101 91 -9.4%
    Net profit margin (%) 9.4% 9.6%  
    No. of Shares 34.3 30.6  
    Diluted Earnings per share* 13.2 11.9  
    P/E Ratio   10.3  
    * annualised      

    Having said that, FCL is experiencing volume and realisation pressure, which is reflected in topline and operating margins. The company stated that Bharat Sanchar Nigam Ltd. (BSNL) -- probably the only JFTC buyer in the country -- has considerably reduced JFTC tender prices. Also, with demand for high bandwidth, there is a shift towards optic fibre cables (OFC), which could be compounded with the current slump in optic fibre prices. Domestic sales for 1QFY03 are lower by 31% YoY. Performance for FY02 is likely to have been salvaged, as delayed Bharat Sanchar Nigam Ltd. (BSNL) orders came through in the third quarter. The industry does pick up momentum in the second half of the fiscal, as service providers can more conveniently lay cables post monsoon.

    As was indicated in 1QFY03 results, OFC manufacturers are likely to have stalled production with OF prices turning unremunerative. OFC manufacturers had negative operating margins in 1QFY03. FCL is primarily a JFTC and electrical cable manufacturer. In FY02, the concerned divisions contributed to 95% of revenues. Consequently, pricing power, to that extent, was protected. The company has acquired OFC capacity by amalgamating wholly owned subsidiary, Finolex Technologies Ltd. with itself. However, currently the capacity is insignificant. To overcome such constraints the company is undertaking a two-phase expansion programme at Verna, Goa augmenting OFC capacity by 1.2 m fibre kilometers (mFKm) in each stage. Trial production under phase-I is likely to commence in September/October '02 involving an outlay of Rs 1,250 m.

    Rapid escalation in internet usage, cable T.V penetration and multi-media applications has led to growing demand for bandwidth. We had mentioned in our earlier quarterly reports that FCL faces 'technology risk', as telecom service providers shift to optic fibre cables. The company seems to have addressed the problem. That said, FCL has 10.6 m cable kilometers (CKm) of JFTC capacity and a shift to OFC is likely to result in build-up of idle capacity. To meet the challenge, the company has shown adeptness by penetrating export markets. Exports more than doubled in FY02 and have more than quadrupled in 1QFY03. Consequently, in the first quarter itself the company has covered approximately half of FY02 exports. However, export growth is not likely to be able to compensate for decline in domestic sales.

    In the past three years, FCL has announced a 1:1 bonus and two buyback offers. The latest offer, through the tender route, at Rs 200/ share with aggregate outlay of Rs 750 m closed recently. The company also declares considerable dividends. At Rs 123, the scrip is trading on a multiple of 10.3x 1QFY03 annualised earnings. The stock trades in a band of 5x-8x full year earnings.

     

     

    Equitymaster requests your view! Post a comment on "Finolex Cables: JFTC, asset or liability?". Click here!

      
     

    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    FINOLEX CABLES SHARE PRICE


    Aug 22, 2017 (Close)

    TRACK FINOLEX CABLES

    • Track your investment in FINOLEX CABLES with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MORE ON FINOLEX CABLES

    FINOLEX CABLES 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE FINOLEX CABLES WITH

    MARKET STATS