8-Jan-2018 : Headquartered in Delhi, CMI Ltd is engaged in manufacturing cables for various industries such as Railways, Oil & Gas, Telecommunications, Energy, Industrial, Power, Petrochemicals etc. CMI Ltd is present in the entire value chain of the wire and cable industry, starting from design, development and manufacturing to marketing and distribution of cables. Its comprehensive product portfolio includes electric cables for Railways, Metro Projects, Utilities, Buildings, Data Transmission, Instrumentation, Submarine cables, Control Cables, Special cables and Extra High Voltage cables. CMI Ltd is one of the few approved vendors to supply signaling cables to Railways.

As per IEEMA Annual reports, the Indian Wire and Cable market is expected to increase from estimated 39200 crore in 2015-16 to 68561 corers in 2019-20. Over the years many factors have contributed to the growth of the Indian wire and cable industry, especially the growing investments in railways, power, telecom and metro projects. In the next couple of years, there are few factors that will drive the growth of the wire and cable industry e.g. increased investment in Indian Railways and metro projects, expansion and revamping of T&D infrastructure, growth in renewable power generation, higher CAPEX on telecom sector, growing focus on smart cities.

CMI Ltd may be a potential beneficiary of the increased investment in railways as it is one of the few approved vendors of the Indian Railways. The Indian Railways target to electrify all its broad gauge track by fiscal year 2022. Indian Railways prepared an action plan to electrify 38000 R-km in five years, for an estimated cost of Rs 32,591 crore. Even if we keep aside this factor, CMI Ltd has substantial order book of Rs 3 billion at the end of Q1 FY 2018, which gives revenue visibility of the next nine months.

In February 2016, CMI Ltdacquired the manufacturing plant of General Cable Energy, a wholly owned subsidiary of US based general cable corporation. The plant in Baddi has an installed capacity to potentially generate 3-4 times the FY-16 revenue of CMI Ltd. Thus, CMI Ltd doesn’t need any immediate CAPEX to serve the increased demand of Wire and Cable in the coming years.

CMI Ltd.’s past performance was also quite impressive. In the last financial year, its revenue increased by 56%, EBIDTA increased by 58%. However, the profit declined from 106 crore to 30 crore primarily because of high depreciation and finance cost (as it acquired Baddi plant). At the end of FY-2017, the debt equity ratio is hovering around 0.65, which is quite comfortable. EBIDTA margin for the financial year 2017 was 14%. However, this may decline to some extent because of high working capital loan.

As on the date of writing this note, the market price of the stock is Rs 290, which is available at a PE of 12. Even if we consider tax reversal in the last financial year, this stock is available at a discount in comparison to the other cable companies like KEI, Finolex Cables etc. Thus, we believe that there is substantial headroom for the stock price to increase.  We expect the stock to achieve Rs 396 in the next 12 months.

NSE Code : CMICABLES

BSE Code : 517330

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