Cables and Wires — Q4'24 review
The cable and wire industry is buzzing with activity, fueled by strong growth in infrastructure, housing demand, and a healthy export market. Major players in the sector reported a stellar 18% year-on-year increase in revenue, with a combined revenue of approximately ₹49,000 crore.
This positive trend is expected to continue, with industry concalls predicting growth of 10–12% in the coming years.
Assuming the major players represent 60–65% of the entire market, the total cable and wire market in India is estimated to be around ₹75,000-₹80,000 crore.
Key Drivers of Growth continue to be Infrastructure, housing and export demand.
Lets see how the companies fared in Q4'24 and what lies ahead for this sector.
Sales and profit growth
As evident from the table above, all the companies have enjoyed a healthy growth in sales, operating profits and finally the stock price with most of them doubling in value. The investors have re-rated all the companies and most of them are trading at FMCG valuations. As seen in the table below, except Havells, most of them were in the late teens or early 20’s. ( Disclaimer —For Apar and Havells, wire and cable form a small portion of their revenue, so a like to like comparison doesnt make sense)
Adding Shareholder Value:
- Beyond healthy revenue and profit growth, the cable and wire industry has also seen a significant increase in investor confidence. This is reflected in the soaring stock prices of major players, with many doubling in value.
- Apar leads the pack with 180% returns followed by paramount and KEI
- Investors have re-rated the sector, assigning valuations typically reserved for stable, high-growth companies like those in the FMCG (Fast Moving Consumer Goods) industry.
- Again Apar leads the pack followed by Finolex. The Price to earnings range is now 28 to 93( This was 9 to 70 earlier).
Nuances to Consider: It’s important to note that companies like Havells and Apar have a more diversified business portfolio. While they have shown strong growth in the cable and wire segment, it doesn’t represent their entire revenue stream. Therefore, a direct comparison to companies solely focused on cable and wires might not be entirely accurate.
Margin Trends
- Margins showed an uptrend for all the players with universal cable and Havells showing the strong growth quarterly
- Paramount showed the biggest growth on a yearly basis.
- This also shows that most of them have been able to protect their margins in face of volatile copper prices.
The chart below shows the volatility of copper prices over the last 1 year.
Revenue market share over 3 years
- The table below throws an interesting insight. The total universe is the companies considered here for our analysis.
- Revenue share would be a better metric to judge
- Apar and paramount standout as they have managed to increase the revenue share each year.
- Polycab has managed to gain 1% revenue market share over 3 years from our universe and RR seems to have lost revenue share every consecutive year.( Cos having wires and cables both have gained share and cos who may not have wire in the portfolio seem to have lost share)
Guidance:
- All the companies have given a very strong guidance. They anticipate the sector itself to grow at 10–12% and with minor share wins from the unorganized sector, all of them anticipate to grow at 15% +.
- As seen from below summary, KEI and polycab will undertake the most aggressive capex between 800–1000 cr
- All the players expect a topline growth of atleast 15% for FY 25
- Margins to be maintained, with RR expecting a margin improvement
- Exports will continue to be strong
Conclusion:
Interesting times ahead for this sector, as this continues to be a proxy for a lot of hot sectors like renewables, real estate, railways and defence to name a few.
Q3 update, click here
Q2 update, click here
Q1 update, click here
For a basic overview click here