FINCABLES - Finolex Cables Ltd. Share Price

In the Q1 FY '26 Earnings Conference Call for Finolex Cables Limited, management provided an optimistic outlook with key performance indicators. Sales for the quarter reached approximately INR 1,400 crore, reflecting a robust growth of 13% compared to the same period last year. Profit After Tax (PAT) also rose by 13%, maintaining steady gross margins at about 20%.

Management highlighted that the electrical segment experienced an overall volume increase of roughly 16%, driven predominantly by power cables rather than wires, which faced challenges due to unseasonal rains affecting agricultural demand. In contrast, the communication cables segment saw a decline in both volumes and values as negotiations for key contracts extended into subsequent months.

Forward-looking, management anticipates that the current surge in real estate projects will yield double-digit volume growth in the wires category. They expect this momentum to continue for at least four to six quarters, suggesting a favorable market condition for the company's growth trajectory.

Managed costs included an increase in advertisement and promotional spending, which was about INR 20 crore for the quarter, up from INR 11 crore in the prior year. Moreover, management indicated that their capex plans for the year total approximately INR 300 crore, with INR 60 crore to INR 80 crore earmarked for electrical cables and the remainder supporting initiatives in communication cables.

Overall, management's outlook remains cautious yet positive, focusing on leveraging ongoing projects and enhancing profitability through strategic investments and effective resource allocation.

Here are the major questions and detailed answers from the Q&A section of the earnings transcript for Finolex Cables Limited:

1. Question: "Despite having a volume growth of 16% in the wires category and cables almost double, why is there hardly a 1.5% jump in the EBIT in the segment?"

   Answer: The primary reason is the product mix; we've been shifting more towards project sales, which are typically at discounted prices. This trend has been consistent over the past few quarters and is affecting our profitability.

2. Question: "Can you provide the absolute sales numbers for cables and wires during this quarter as well as for FY '25?"

   Answer: I currently do not have the exact figures on hand, but I can provide that information separately after the call.

3. Question: "Why has Finolex underperformed against the industry over the past 4-5 years, particularly in the wire segment?"

   Answer: We've been quite subdued on the power cable side, where most peers have seen substantial growth. Within wires, competitive pricing has affected us, as we've focused on maintaining margins rather than aggressive pricing strategies.

4. Question: "What are the internal projections for medium-term growth, especially regarding wire demand?"

   Answer: I anticipate that the completion of several real estate projects will drive demand, leading to potential double-digit volume growth in wires over the next 4 to 6 quarters.

5. Question: "Can you explain the current capacity investments in cables and the expected turnover?"

   Answer: Our current investment in electrical cables is approximately INR 60 crore to INR 80 crore, with a potential turnover of up to INR 6,500 crore, assuming a gross block of INR 700 crore to INR 750 crore.

6. Question: "Is Finolex considering a hedging strategy to protect against copper price volatility?"

   Answer: We do not purchase copper on the spot market but rather based on the monthly average. This approach helps mitigate price fluctuations; however, any pricing action in response to such changes can be delayed to match market conditions.

7. Question: "What is the ad spend for this quarter compared to the previous year?"

   Answer: Our promotional costs this quarter were around INR 20 crore, compared to INR 11 crore last year. This increase was due to commitments from prior advertising spots.

8. Question: "Are there any expected timelines for receiving orders for the BharatNet project?"

   Answer: Orders from tender winners have recently been issued, but they are preparing for 2-3 months before releasing the final orders. Therefore, we anticipate some time before we see significant orders flowing in.