The New Delhi-based Cords Cable Industries is into manufacturing of cables, catering to sectors (customised) like power, steel, cement, and refinery/petroleum. The company’s cables are also used in residential and commercial units (used in power supply). The company has a manufacturing facility at Chopanki in Rajasthan.
Considering the upper band, the cable-manufacturer intends to put up a capital of around Rs 41 crore. It intends to invest around Rs 52 crore in setting up production facilities at Pathredi in Rajasthan. It has found land, measuring 78, 800 sq mt at Pathredi, which would be allocated on a lease basis (for a period of 99 years). For the plant and machinery, the company has earmarked around Rs 26 crore.
Business potential
More than 50% of the company’s revenues come from the power sector alone. Also, chunk of its revenues through exports come from power sector companies. The company’s current order book is around Rs 77.15 crore, of which almost Rs 37 crore comes from power sector companies. Hence, the company is heavily dependent on the power sector.
Considering the India-building story going great guns and the vital role played by the power sector, the company stands a better chance to milk and be a part of this growth story. The company’s sales and profit after tax have grown at a CAGR of 60% and 100% respectively. A growth trend is conspicuous more in the net profit margin, which has grown steadily.
Valuation
On the valuation front, taking into account, the annualised earnings on a post-issue equity basis, the company’s commands a P/E of around 13.32(x) and 14.39(x) at the lower and higher end of the price band respectively. It quotes an EPS of around Rs 9.37.
Considering this, and on an immediate comparison, its peers like Torrent Cables, KEI Industries, which are better (quoting a P/E of around 8(x) and 10(x) respectively) and bigger (sales of around Rs 199.7 crore and Rs 601 crore respectively) companies, this seems a lucrative investment option.
However, considering the company’s growth trend, its net profit margin is getting stabilised around 8.5%, the scrip offering is fairly valued. Also, a lot more depends on the company’s ability to tap into the potential of the production facilities. The facility at Chopanki is owned by the company, while the facility at Pathredi is on lease, involving a recurring cost for the company.