Geojit Financial Services has set a target price of Rs 1,494 for Finolex Cables, following a 44% revenue jump in the first quarter of FY27. While demand from the power and data center sectors remains strong, investors should note potential risks, including fuel-linked production hurdles and the possibility of profit margins normalizing from current levels.
Geojit Financial Services has set a target price of Rs 1,494 for Finolex Cables, citing strong business momentum. This follows the company's performance in the first quarter of the 2027 financial year, where revenue grew by 44% year-on-year to Rs 2,013 crore.
Strong Growth and Operational Hurdles
The company’s growth was driven by its two main segments: electrical and communication cables. Electrical cables, which account for roughly 80% of revenue, saw a 47% increase in sales, while the communication cables segment jumped by 62%, largely due to higher demand for optical fiber used in data centers. The company also benefits from its ability to produce its own essential raw materials like copper and PVC, which helps it manage costs.
Despite the positive revenue growth, the company has faced operational challenges. A shortage of LPG and gas supplies has created hurdles for its copper rod production. Investors should track how the company manages these fuel-linked supply chain issues, as they directly affect production volumes. Any prolonged delay in securing stable fuel supplies could hamper the company's ability to meet rising demand.
Profit margins also showed improvement, rising to 12.3% in the recent quarter, up by 294 basis points compared to the same period last year. This increase was largely due to a favorable product mix and the company’s ability to pass on fluctuations in copper prices to customers. However, analysts caution that sustaining these higher profit margins may prove challenging. If raw material prices become too volatile or if the sales mix changes, the current profit margins could come under pressure and return to more normal levels.
Looking ahead, the demand outlook remains supported by steady activity in the real estate sector, government infrastructure spending, and the expansion of data centers. Finolex Cables is also increasing its focus on exports to diversify its revenue. The target price set by the brokerage also takes into account the value of the company’s stake in Finolex Industries. Moving forward, the most important factors for shareholders to watch will be the stabilization of fuel supplies for production, the company’s ability to maintain its profit margins, and the successful execution of its fiber expansion projects.