Finolex Cables rides data-centre fibre upcycle as capacity expansion boosts growth

Investment View and Key Strengths

Geojit maintains an Accumulate rating on Finolex Cables Ltd. with a target price of Rs 1,494, compared with the CMP of Rs 1,280. The view is supported by healthy demand across electrical and communication cables, a data-centre-led optic-fibre upcycle and export opportunities.

Finolex Cables manufactures electrical cables, which contribute 80 per cent of revenue, and communication cables, which contribute 16 per cent. The company’s key strengths include backward integration in copper and PVC, a wide distribution network and strong brand recall.

Q1FY27 Financial Performance

Standalone Q1FY27 revenue increased 44.3 per cent year on year and 3.2 per cent quarter on quarter to Rs 2,013 crore. Electrical Cables revenue grew 47 per cent year on year, driven by high double-digit growth in automotive, solar, agriculture and flexible cables. Building Wire demand remained muted because of channel destocking.

Communication Cables revenue increased 62 per cent year on year, supported by around 30 per cent growth in optic-fibre-cable volumes and firm fibre realisations. Copper Rod performance was affected by a temporary LPG-related plant shutdown.

EBITDA margin expanded 294 basis points year on year and 189 basis points sequentially to 12.3 per cent, aided by operating leverage, a favourable product mix and copper-cost pass-through. Reported PAT rose 59.4 per cent year on year to Rs 221 crore.

Capacity Expansion and Fibre Upcycle

Management expects robust communication and power-cable demand over the next two to three years, driven by AI- and data-centre-led fibre demand and large-scale investments. Standard G.652.D fibre prices rose sharply from around $5-6 per km in December 2025 to $17-18 per km before settling at around $11-13 per km. Management expects the global shortage to continue in the near term.

Finolex Cables is accelerating fibre-capacity expansion, strengthening research and development for higher-fibre-count designs, and already exports fibre and data-centre cables to the US and Europe. Its preform plant, equivalent to about 4 million km of fibre and sufficient for captive consumption, has been commissioned. Stabilisation is expected over the next few months, with margin benefits expected from Q3FY27.

OFC draw capacity is being expanded from 4 million km to 8 million km by September 2026, while cabling capacity is planned to rise to 8-10 million km subsequently. At 8 million km and around $11 per km, management indicated fibre-only revenue potential of about $88 million, with 25-30 per cent value addition from cabling.

Management has guided for an EBITDA margin of 11-12 per cent, supported by higher capacity utilisation, the ramp-up of E-Beam products in premium segments and the planned doubling of OFC capacity to 8 million km by Q2FY27.

Earnings Estimates and Growth Outlook

Geojit raised its FY27E and FY28E estimates following the Q1FY27 performance and the improved fibre outlook.

Geojit raised FY27E and FY28E revenue estimates by 10.5 per cent and 8.3 per cent, respectively. EBITDA estimates were increased by 21.5 per cent and 20.1 per cent, while adjusted EPS estimates were raised by 6.7 per cent and 5.3 per cent, respectively.

The broker expects earnings to grow at about 19 per cent CAGR over FY26-FY28E, driven by real estate and construction, power transmission and distribution, renewables, data centres and exports.

Valuation and Key Risks

Geojit’s target price of Rs 1,494 is based on a sum-of-the-parts valuation. The standalone core business is valued at Rs 1,380 per share, based on 24 times FY28E P/E. A further Rs 113 per share is attributed to Finolex Cables’ 32.4 per cent stake in Finolex Industries after applying a 40 per cent holding-company discount.

The key concerns identified by the broker are input-price volatility and the sharp run-up in the share price.