Cables and Wires — Q3'24
Q3'24 result update — Polycab, Apar, Finolex, Paramount, universal and RR
Q3'24 Summary:
Demand for cables is greater than wires. Exports are very strong. Growth led by infrastructure, capex revival and real estate
Margin trends for the quarter:
- All other companies showed a slight dip in their EBITDA margins Except for universal ( Uni cab had a low base of 5% ebitda margins in Q2'24)
- Polycab continued the dominance in terms of margin profile.
Stock performance — Sales vs EBITDA vs returns
- KEI, paramount have showed the biggest sales and EBITDA expansion when compared year on year. This is reflected in both leading the 1 year return profile
- Not fair to compare stock returns of Apar and Havells, since both have a lot of non wire cable related businesses.
PE comparison across cos:
On the back of stellar numbers, all the companies have undergone PE expansion with KEI a pure cable company undergoing the biggest expansion. The guidance of 15–18% across players shows the demand.
Meanwhile what happened at Polycab?
Income-tax department said it started search and seizure operations in Polycab and some of its distributors on 12 Dec’23 at more than 50 locations across Mumbai, Pune, Aurangabad, Nasik, Daman, Halol, and Delhi.
Unaccounted cash sales of ₹1,000 crore (not recorded in the books), unaccounted cash payments of more than ₹400 crore made by a distributor on behalf of Polycab, and ₹100 crore of non-genuine expenses are some of the allegations. Cash exceeding ₹4 crore and more than 25 bank lockers have been put on restraint
Co has claimed that it is yet to receive any communication from the IT department regarding this. The stock however tanked more than 25% on this news. As on this writing, the stock has recovered some of the losses and looks one of the most reasonably priced stock.
Management commentaries:
KEI:
- Export sale in Q3 is INR284 crores, with a growth of 98%.
- Wire — 70%, cable 95%.450–500 cr capex.
- Order book of 3826 cr ( 934cr EPC, 594cr EHV, 474cr exports, 1823 domestic cables_
- Exporting only to Australia current. 1 800 Mw of coal power plant consumes 15–20cr of cables.
- Consumption of cable is 3.5–4% of the project cost viz renewables, data centres.
- Industry will grow at 12–13%, KEI will grow at 16%+
Polycab:
- Demand for cables was stronger than wires.
- Higher marketing spend 4–5% of B2C sales
- Restructuring FMEG business.
- Strong export demand, expect better exports after distribution rejig in America.
- Income tax related questions were answered mostly by saying we are yet to receive any written communication.
RR kabel
- 9month volume growth domestic 12%, export 36% volume growth
- Cable seeing good demand in export markets
- Expecting 2500cr additional revenue on capex of 500cr
Havells
- Margins muted due to higher ad spends and change in product mix ( cable growth has been higher than wires)
- Cables, wire margins sustainable
To know more about this sector, click here.
To read Q2'24 review click here