Finolex Cables Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Finolex Cables Ltd (FINCABLES) Q2 FY24 Earnings Concall

• Financial Performance
  • Revenue up 9% this quarter compared to previous quarter.
  • Gross margin improved to 23% this quarter from 21% last quarter.
  • Quarterly profits at $165 crores and 21% higher than $136 crores in same quarter last year
  • Recognized one-time profit of $12.5 crores related to JV liquidation.
• Segment Performance
  • Electrical wires volume grew 10%.
  • Power cables volume increased 37% versus low base last year.
  • Communication cables soft as expected government tenders not yet released, now expected in Dec/Jan.
  • New lighting and conduit products seeing good volumes and order intake.
  • Appliance lines muted due to lingering consumer impact of inflation.
• CapEx Plans
  • E-Beam project to be completed by end of Q1 2024.
  • Preform project building to be done by June 2024.
  • INR400 cr outlay over next 12-18 months.
  • Typical trigger is 75-80% utilization before next expansion.
  • Equipment installation/testing/commissioning to complete by Sep-Nov 2024.
  • Additional fiber optic cable capacity projects ongoing.
  • Building ready, spending will follow equipment delivery.
• Distributor Count
  • Count reduced from 689 in Feb 2023 to 600 in annual report.
  • Housekeeping to remove non-performing distributors.
  • Back to around 700 distributors now at end of September.
• Performance vs. Peers
  • Finolex has 1-1.5% share of power cable market vs peers with much larger share.
  • Peers growth figures include power cables, not apples-to-apples comparison.
  • Finolex has 22% share of organized wire market and performing well there.
• Margin Improvement and Working Capital
  • Further 1% possible if input prices remain stable.
  • Brought down cost of goods sold from 81% to 75% over past year through efficiency gains, inventory gains, purchasing gains, product margin improvements.
  • Working capital currently at 35-40 days.
  • Working with consultant to optimize inventory and availability.
  • 50 days sustainable target.
• Optical Fiber Cable Growth
  • Growth contingent on government and private spending.
  • Spending currently muted but essential for 5G and connectivity.
  • Continuing investments to be prepared for future tenders.
  • Prices currently around $3.15 per fiber kilometer.
  • Expect prices to stabilize and possibly increase in next 3-6 months.
• 5G Network Investment
  • Telcos have budgeted but spending less than expected.
  • Dense fiberization needed to realize full 5G potential.
  • Spending can be delayed short term but essential long term.
• Margin Outlook
  • Targeting 14% margin in electrical cables segment.
  • Hit 13% last quarter, 14.25% this quarter.
  • Believe around 14% is sustainable level.
• Capacity Utilization and Volume Trends
  • Currently above 60% overall.
  • Expanding in higher utilization areas like appliance cables.
  • Power cables volume up 37%.
  • Wires up 10%, lower than Q1.
  • Wires sales expected to improve as construction projects complete.