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Torent Cables Investment Update

March 13, 2007

Torrent Cables is a leader in high-tension power cables. Its integrated manufacturing is equipped with the most advanced and well-accepted technology for the manufacture of XLPE-insulated cables up to 66 KV.

Major customers of TCL consist of private players engaged in the distribution of power, industrial houses, engineering, procurement and contractor (EPC) construction and state electricity boards (SEBs).

Of its various listed competitors (Universal Cables, Industrial Cables, Cable Corporation of India, Nicco Corporation, Fort Gloater Industries, RPG Cables, Polycab Wires, and Uniflex Cables), TCL is the most preferred and financially sound. Private sector power distributors — TCL’s main clients — are performing well and they are expected to maintain a similar trend. Public sector companies are also going private and working very hard to cut their T&D losses to improve their bottom line.

Insulated power cables are very safe means to transmit and distribute power among a large numbers of customers, eliminating power theft and reducer transmission and distribution losses considerably. Liberalization in the power sector is expected to create competition among distribution companies and the pressure to perform better will result in higher demand for insulated power cables. Overall, the entire sector is expected to do well in future.

TCL bravely faced rough weather in the recent past. During the turbulent times, TCL undertook a program for massive optimisation of its operations and reduction in cost. The company adopted the policy of cost-consciousness, waste reduction and improving competitiveness. Infusion of Rs 20-crore interest-free funds by the promoters in FY 2004 significantly supported the company’s efforts into reduce interest expenses. Today, TCL is one of fastest-growing and its products are perceived in the market as one of the highest quality yet available at competitive prices. Besides, unlike most others, the company is meeting all its delivery commitments on time.

Besides, the government’s initiatives on power sector reforms have resulted in an increase in demand for power-related products, including cables. Presently, India faces a 10-12% gap in supply of and demand for power. A rural electrification programme has been initiated to ensure electrification of all villages by 2009. There has also been a continued effort to upgrade and modernise the power distribution network. With all these developments, the power industry would attract increased investment. This means more demand for power cables. With this in mind, the cable industry is also working towards increasing its capacities.

TCL’s sales rose 55% to Rs 50.73 crore and net profit was up 66% to Rs 7.02 crore in the quarter ended December 2006 over the quarter ended December 2005. In FY 2007, we expect TCL to register sales and net profit of Rs 186.88 crore and Rs 18.95 crore, respectively. On an equity of Rs 7.48 crore and face value of Rs 10 per share, EPS works out to Rs 25.3. At Rs 179, PE is just 7.1. Long Term Investors can BUY Torent Cables.

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