Finolex Cables stock is a good buy

The global wire and cable industry market size is currently at around US 200 billion dollars and is projected to grow to US 294 billion dollars in the next few years. A wire is a single electrical conductor whereas a group of wires bundled together in an assembly is called a cable. Various cables are widely used in the power and telecommunication industry. China and India are the two major countries for establishing new power plants, building smart infrastructure and advanced communication facilities. There is an increasing demand for cables in the renewable power generation, data centres and IT facilities providing a great opportunity for the cable industry. Plus increasing investment in the industrial sector and transmission and distribution of electric power sector is perpetuating heavy demand for the wire and cable industry. There are many big wire and cable listed companies and Finolex Cables is the oldest in the country. Starting as a small-scale industrial unit in 1956 for the manufacture of PVC insulated cables for the automobile industry, the Finolex brand came into existence. The name Finolex was born from the words "Fine" and "Flexibles" and the "O" in between with an electric arc across it signifies the electrical cable business of the company. After relentless search for growth and doughty perseverance under difficult times, the enterprise turned into a limited company in 1972. Following a public issue in 1983, there has been no looking back for Finolex Cables. The company is the largest and leading manufacturer of electrical and telecommunication cables in the country. Finolex Cables is in the business of manufacturing PVC insulated electrical cables for the automobile industry and a wide product range of PVC Industrial Cables, PVC Insulated Winding Wires and Cables, Power and Control Cables, Polyethylene Insulated Jelly Filled Telephone Cables, Auto and Battery Cables, LAN Cables, Switchboard Cables, Fibre Optic Cables and Solar Cables. Apart from a wide variety of Wires and Cables, Finolex also manufactures lighting products, electrical accessories, switchgear, fans and water heaters. The company has manufacturing facilities in Pune, Goa and Uttarakhand and has over the years established its reputation as an innovative leader and quality manufacturer by continuously upgrading technology, modernising its manufacturing facilities and maintaining highest standards of quality and services. There has been a lot of volatility in the raw material prices for the production of wires and cables during the last two years. Primary raw materials required are rubber and plastic based PVC grains for cables while it is essentially copper for wires. Increase in the price of copper and crude has dented the profitability margins for the industry. Finolex has seen a sharp decline in profitability on sharp correction in PVC prices but is able to withstand the shock due to its robust balance sheet. The Finolex Cables stock is currently trading at around Rs 550 levels on the stock exchanges and analysts and brokerage houses are hopeful that the stock can appreciate by more than 20% in the next 12 months.

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