Finolex Cables Ltd. Upgraded to Hold by MarketsMOJO Amid Mixed Financial and Technical Signals

Quality Assessment: Stability Amidst Flat Performance

Finolex Cables’ quality metrics present a mixed but stable picture. The company maintains a low average Debt to Equity ratio of zero, indicating a conservative capital structure with minimal leverage risk. This financial prudence is a positive quality marker, especially in a capital-intensive industry like electrical cables. The return on equity (ROE) stands at a moderate 11.6%, reflecting reasonable profitability relative to shareholder equity. However, the company’s return on capital employed (ROCE) for the half-year ended September 2025 is at a low 15.10%, signalling some pressure on capital efficiency.

Net sales have demonstrated healthy long-term growth, expanding at an annual rate of 18.54%, while operating profit has grown at 15.02% annually. These figures underscore a consistent growth trajectory in core operations, which supports the company’s quality credentials. Nevertheless, the recent quarterly results for Q2 FY25-26 were flat, with profits declining by 5% year-on-year, indicating near-term challenges in operational momentum.

Valuation: Attractive Yet Fairly Priced

Valuation metrics have played a significant role in the upgrade to Hold. Finolex Cables is currently trading at a price of ₹750.20, with a price-to-book (P/B) ratio of 2.0. This valuation is considered attractive relative to its historical averages and peer group benchmarks within the cables industry. The stock’s market capitalisation grade is rated 3, reflecting a mid-sized market cap that offers a balance between liquidity and growth potential.

Despite the stock’s underperformance over the past year, with a return of -36.46% compared to the Sensex’s 9.06% gain, the valuation does not appear stretched. The 52-week high of ₹1,202.35 and low of ₹708.00 provide a wide trading range, with the current price closer to the lower end, suggesting some value opportunity for investors willing to look beyond short-term volatility.

Financial Trend: Flat Near-Term Results Amid Long-Term Growth

The financial trend for Finolex Cables has been somewhat subdued in the near term. The company reported flat financial performance in Q2 FY25-26, with cash and cash equivalents at a low ₹54.94 crores, indicating limited liquidity buffers. Profitability has also contracted slightly, with a 5% decline in profits over the past year. This has contributed to the stock’s negative return of -36.46% over the same period, underperforming the broader BSE500 index and the Sensex.

However, the longer-term financial trajectory remains positive. Over five years, Finolex Cables has delivered a robust 118.97% return, outperforming the Sensex’s 78.47% gain. Over ten years, the stock has generated a 197.05% return, close to the Sensex’s 226.30%. This indicates that while short-term headwinds persist, the company’s fundamentals have supported sustained growth over extended periods.

Institutional holdings stand at a healthy 25.78%, reflecting confidence from sophisticated investors who typically conduct rigorous fundamental analysis. This institutional backing lends credibility to the company’s prospects despite recent volatility.

Technicals: Shift from Bearish to Mildly Bearish Signals

The most significant driver behind the upgrade to Hold is the improvement in technical indicators. The technical grade has shifted from bearish to mildly bearish, signalling a potential stabilisation in price momentum. Key technical metrics present a nuanced picture:

• MACD: Weekly readings have turned mildly bullish, although monthly signals remain bearish.


• RSI: Both weekly and monthly relative strength index readings show no clear signal, indicating a neutral momentum environment.


• Bollinger Bands: Weekly indicators remain bearish, while monthly bands have softened to mildly bearish.


• Moving Averages: Daily moving averages continue to show bearish trends, suggesting short-term caution.


• KST (Know Sure Thing): Weekly KST is mildly bullish, but monthly remains bearish.


• Dow Theory: Weekly signals are mildly bullish, with monthly mildly bearish.


• On-Balance Volume (OBV): Weekly OBV is mildly bullish, while monthly is mildly bearish.

These mixed signals suggest that while the stock has not yet entered a strong uptrend, the downward momentum is easing. The stock price closed at ₹750.20 on 1 January 2026, up 2.55% from the previous close of ₹731.55, with intraday highs reaching ₹752.75. This modest price recovery supports the technical upgrade and the Hold rating.

Comparative Performance and Market Context

When benchmarked against the Sensex, Finolex Cables’ recent performance has lagged significantly. Over the past one year and year-to-date, the stock has declined by 36.46%, while the Sensex has gained 9.06%. Over three years, the stock’s return of 37.26% trails the Sensex’s 40.07%, and over ten years, the stock’s 197.05% return is slightly behind the Sensex’s 226.30%. This relative underperformance highlights the challenges faced by the company in maintaining investor confidence amid sectoral and macroeconomic pressures.

Despite these headwinds, the company’s fundamentals and improving technical outlook justify the Hold rating. Investors are advised to monitor quarterly results closely, particularly for signs of margin recovery and cash flow improvement, which could catalyse a further upgrade in rating.

Conclusion: A Balanced Hold Amid Mixed Signals

Finolex Cables Ltd.’s upgrade from Sell to Hold reflects a cautious optimism grounded in improved technical indicators and attractive valuation metrics, balanced against flat near-term financial results and recent stock underperformance. The company’s strong balance sheet, low leverage, and healthy long-term sales growth underpin its quality credentials, while the current price offers a reasonable entry point relative to historical valuations.

However, investors should remain mindful of the flat quarterly performance, subdued profitability, and mixed technical signals that temper enthusiasm. The Hold rating is appropriate for investors seeking exposure to the cables sector with a moderate risk appetite, awaiting clearer signs of financial and operational recovery before committing to a more bullish stance.

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