Cables and wires — Q1'24 update
Updated with Q1 numbers
Overall, this sector which makes a proxy play to real estate, infrastructure delivered healthy numbers on YoY and slightly flattish on QoQ due to a higher base. Paramount was the only exception to show growth on both the counts.
As seen below, due to softening of raw material prices mainly copper, Aluminum, the margins for all the players have improved on an average by 200bps.
On a YoY count, barring Universal, all of the showed a decent growth in sales and EBITDA. Havells has a lot of other segments and hence stock price cant be correlated with the numbers. The stocks have given anywhere between 62% to 308% returns.
EBITDA margin of cables is in the range of 10–11% and margin of wires segment is in the range of 14–15%. This explains why the likes of Polycab does a higher EBITDA margin.
Future outlook:
All the companies have guided for strong growth going forward.
Apar and paramount have been the biggest beneficiary of export, China+1, trade restrictions on China theme. Paramount export has grown from 4.3% to 50%, with US being the biggest market
Paramount is seeing a strong demand from USA. Exports were 7% of revenue in FY 21 to 22% in FY 22 and 50% currently in FY23
Similarly for Apar, Exports for cables have almost doubled, However in the latest concall Apar management has sounded cautious and expect a slowdown in export markets due to de-inventorization and reduced lead times. Domestic Indian market however remained robust with several projects in progress.
How has the market rewarded these stocks in terms of valuation? The P/E has expandd anywhere from 50 to 100%( havells not like to like because of other segments). Polycab, KEI are being valued similar to FMCG companies. But again, they have built strong distribution channels and have FMEG as optionality
Looks like lot of upside is already factored in the prices. But again, the industry is poised to grow at a rate of 10% and around 60–70% of the sector is organized, so the valuations can remain stretched.
The below table contains the data points sequentially as well as of last 2 years
