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.