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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.
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