Finolex Cables in limelight

Finolex Cables is currently among the top three losers on the BSE, falling 6% or Rs. 78.55 to Rs. 1,231.15, against its previous close of Rs. 1,309.70. The stock opened higher at Rs. 1,328 but soon came under selling pressure, touching an intraday low of Rs. 1,218.10. Trading volumes rose to 4.59 lakh shares against a two-week average of 0.83 lakh shares. Interestingly, market depth showed more buyers than sellers, with buy orders of 92,162 shares against sell orders of 44,791 shares, suggesting buying interest emerging at lower levels.

Trigger

• Sharp profit booking following yesterday's nearly 20% upper-circuit rally during the special Muhurat Trading session.
• Strong Q2FY27 results: Consolidated revenue surged 65% YoY to Rs. 2,269 crore from Rs. 1,376 crore.
• EBITDA more than doubled to Rs. 312 crore from Rs. 145 crore a year earlier.
• EBITDA margin expanded to 13.73% from 10.57%, an improvement of 316 bps YoY.
• Consolidated net profit rose 67% YoY to Rs. 273 crore from Rs. 163 crore.
• Electrical cables revenue increased 65% YoY to approximately Rs. 1,960 crore, while communication cables revenue more than doubled to Rs. 230 crore.
• H1FY27 net profit grew 61% YoY to Rs. 522 crore, supported by a 54% increase in revenue to Rs. 4,282 crore.

The sharp decline appears largely driven by profit booking rather than any deterioration in the company's earnings outlook. Finolex Cables had rallied nearly 20% during Sunday's one-hour Muhurat Trading session, when trading activity and liquidity can be relatively limited. Today's regular trading session has provided an opportunity for short-term investors to book gains following the sharp appreciation.

Operationally, the company's performance remains strong. Growth in electrical cables has been supported by demand from automobile, agricultural, industrial and solar applications. The communication cables business has also shown a recovery, with higher optical fibre cable volumes and improved realisations. The company is expanding its fibre-draw facility, with full capacity of 4 million fibre kilometres expected to become operational during FY27.

Despite the correction, the stock continues to trade above its pre-Muhurat levels. At the current price, it commands a consolidated PE of around 20.7 times, compared with a market capitalisation of approximately Rs. 18,871 crore.

The key distinction is that today's fall appears to be a correction following an unusually sharp rally, rather than a negative reaction to the company's fundamentals.