Recommendation From Other Elect.Equip & Auto Parts Sectors

The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations. 

FINOLEX CABLES 

CMP - Rs690
BSE CODE 500144
Volume 2,557
Face Value Rs2
Target Rs760
Stoploss Rs669

Finolex Cables is engaged in manufacturing of electrical and communication cables as well as copper rods. In FY17, it also entered into fans, switchgears and water heaters, which currently account for less than 5% of company’s turnover. Presently, electrical cables contributed 82% to FY17 revenue, while communication cables contributed 13%, copper rods fetched 3% and exports accounted only for 1.2% of the FY17 revenue. Considering the financials for FY17, the company's revenue and PAT posted a growth of 3.6% and 26.9% respectively. Moreover, TTM revenue and profit too posted growth of 12.4% and 11.4%, respectively, in FY17, majorly driven by communication cables, which offset fluctuations in electrical cables segment. The company has been reducing debt over the years and has turned almost debt-free in FY17. Going forward, the company intends to set up PVC electrical conduits and fittings manufacturing facility in Goa, which is expected to be operational by December CY18. Thereby, with strong financials and expansion plans, we recommend a BUY. 

SWARAJ ENGINES 

CMP - Rs1995
BSE CODE 500407
Volume 664
Face Value Rs10
Target Rs2113
Stoploss Rs1870 

Jointly promoted by Mahindra & Mahindra and Kirloskar Industries, Swaraj Engines is engaged in the business of diesel engines (97.6% of FY17 revenue), diesel engine components (0.5%) and spare parts (1.9%). The company supplies 88% of the engines required for M&M's Swaraj brand tractors, which is the fastest growing among its peers. Recently, M&M launched a tractor under Swaraj, which would further enhance demand for SEL’s engines. The company posted robust FY17 revenue and PAT growth of 26.7% and 34%, respectively, while TTM revenue and PAT too posted growth of 42% and 51%, respectively. Further, the company is debt-free and holds negative working capital cycle. Swaraj’s gradual shift towards 41HP+ tractors bodes well for Swaraj Engines, where 41-50HP segment accounted for 49% of FY17 home sales. High HP tractors are being used for other industries, which will ensure robust demand. We recommend BUY