Key highlights from Polycab India Limited (POLYCAB) Q3 FY24 Earnings Concall
- Recent IT Raid Updates
- The incumbent authority conducted search operations POLYCAB’s manufacturing plants, facilities, and offices in the last fortnight of the previous calendar year.
- The company has fully cooperated in the investigation.
- POLYCAB has not received any written communication about the outcome of the search.
- Operations are running smoothly and the management team continues to work to ensure growth.
- Financial Performance
- Achieved highest ever quarterly and 9-month revenues and PAT in its history.
- PAT grew 15% year-on-year.
- Revenue grew 17% YonY, driven by volume growth in domestic wires and cables business.
- EBITDA grew 13% with lower margins due to higher advertising spends.
- 9-month revenue up 27%, EBITDA up 40%, PAT up 46% with margin expansions.
- Industry Outlook
- Demand for residential properties at 10-year high in 2023.
- New project launches outpacing sales over past 2 years.
- Recent years’ new launches will drive heightened wire demand in coming years.
- Favorable momentum in infrastructure, construction and power sectors to drive cables and wires sector.
- Advertising and Promotion Spends
- Advertising and promotion spends doubled QonQ to 2.1% of sales.
- 9-month advertising spend at 4.2% of B2C sales, meeting annual guidance of 3-5%.
- Q3 and Q4 are significant growth quarters, so expect strong Q4 based on high Q3 growth.
- International Business Performance
- International business grew 22% year-on-year in Q3, contributing 6.2% to total revenue.
- Muted growth in past quarters due to US distribution transition and Middle East trade route impact.
- Expects strong Q4 and future performance from international business.
- Good demand across geographies besides Europe.
- Wires and Cables Business Update
- Revenue grew 18% year-on-year driven by volume growth.
- Profitability remains strong with 14% EBIT margins.
- Supplied cables for various national projects in renewables, railways, power etc.
- Demand environment expected to remain strong driven by infrastructure investment.
- Investing significant capex to expand capacity amid strong demand.
- FMEG Business Growth
- Execution has not met expectations.
- Will take 3-4 quarters to stabilize after implementing changes.
- Segregated business into B2B and B2C verticals with separate leadership.
- Focusing on switches and switchgears product categories.
- Have in-house manufacturing and expanded capacities.
- Working on distribution reach and presence across price points.
- Doing cross-selling with wires business.
- Expect higher contribution from these categories in future.
- Outlook
- Guidance of 11-13% EBITDA margins in Cables and Wires continues.
- Able to achieve 14% margins currently due to operational leverage.
- No change in cost structure assumed.
- Evaluating inorganic opportunities if available at good valuations for FMEG business.
- Considering all options to scale up FMEG and grow faster than market.
- No major inorganic moves yet unlike some competitors.
- EHV facility on track to be operational by late FY26 as guided earlier.
- Company believes second half of 2024 will be better than first half.
- Volume Growth
- Domestic Cables and Wires grew around 20% in volumes.
- Cables volume growth higher at around 30%.
- Wires volume growth single digits around 9-10%.
- Capacity Expansion
- Combined cables and wires utilization around 70-75% for Q3.
- Can scale up to 95% utilization.
- 800-900 crores capex this fiscal and 600-700 crores next fiscal.
- Willing to revise capex if more opportunities arise.