Buy Universal Cables stock for long term price appreciation

The MP Birla Group of companies include excellent performing companies such as Birla Corporation Ltd (cement, jute, carbide), Birla Cables Ltd (optical and copper telecommunication cables), Universal Cables Ltd and Vindhya Telelinks Ltd. Universal Cables Limited was established in 1962 for the manufacture of Paper Insulated Cables and is today a leader in the Indian Cable Industry with a complete product range. The product range includes Low Voltage, Medium Voltage and Extra High Voltage XLPE Power Cables up to 500 kV grade, PVC and Rubber Insulated Power Cables up to 11 kV grade, Control and Instrumentation Cables up to 1.1 kV for any number of Cores/Pairs and speciality Rubber Cables known under the brand name UNISTAR. To meet the growing demand of Extra High Voltage Cables (220 kV and above), the company adopted the VCV process at its Satna Plant in Madhya Pradesh  in technical collaboration with the world leader in cable technology, Furukawa Electric Co. Ltd., Japan. The technical collaboration covers cable designing, manufacturing, jointing, testing and installation. Universal Cables has also tied-up with Viscas Corporation, Japan for sourcing new generation cable jointing accessories for 220 kV and above. Apart from manufacturing Electrical Cables, the company has a full-fledged EPC Division to execute turnkey contracts for various projects. The Capacitor Division of the Company which came into operation in 1967 was set up in collaboration with Toshiba of Japan to manufacture world class polypropelene, paper and power capacitors. Subsequently in the year 1977, the company entered into a technical collaboration with General Electric Company of USA for the manufacture of Dielectric Capacitors. Currently, the product range includes Low & High Voltage Capacitors, APFC Panels, Medium Frequency Water Cooled Capacitors for Induction Furnace Application, Surge Protective Capacitors, Tuned and Detuned Filter Capacitors and DC Capacitors. The company posted excellent Q2FY23 quarterly financial

results with sales at Rs 514.28 crore, up 13.99% from Rs. 451.16 crore for the same quarter of last fiscal. The Net Profit rose by 654% at Rs 20.11 crore for the September 2022 quarter, up from Rs 2.66 crore during the September quarter of last year. EBITDA stood at Rs 55.37 crore in September 2022, up by 112.31% from Rs 26.08 crore for the September 2021 quarter. The company’s EPS increased to Rs 5.80 in September 2022 from Rs. 0.77 for the September 2021 quarter. With the Universal Cables stock ruling at Rs 280 on the bourses and a high book value of over Rs 400 and low P/E compared to the industry aggregate P/E, the stock can deliver substantial appreciation over the long term. Universal Cables Ltd also holds a significant substantial equity stake in the other MP Birla group company, Vindhya Telelinks Ltd which quotes at Rs 1,650 on the stock exchanges. The said investment has not been factored in properly by many brokers and stock pickers and hence sector industry stock analysts expect the Universal Cables stock to be a strong fundamental buy for decent long term price appreciation.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.