FINCABLES - Finolex Cables Ltd. Share Price

Management provided an optimistic outlook during the Q3 and 9M FY '26 earnings call, highlighting a solid financial performance. The revenue for the quarter was approximately INR 1,600 crores, reflecting a 35% quarter-on-quarter increase, and for the nine-month period, it totaled about INR 4,370 crores, up 17% compared to the previous year. EBITDA rose by 12% sequentially and by 17% year-over-year, while PAT increased by 10% and 18%, respectively.

Key forward-looking points included:

1. Capacity and Demand: Management noted that overall volume growth in Wires and Cables saw an increase of over 25%, with significant contributions from Electric Wires (28%), Auto cables (42%), and Industrial cables (28%). They expect continued growth driven by rising demand for fiber cables due to hardening fiber prices, which increased from under $3 to about $5, indicating a stronger market.

2. Expansion Initiatives: The company is in the process of expanding its preform and fiber draw capacities. The commissioning of a preform factory is expected in the current fiscal, while the total fiber draw capacity is anticipated to reach 8 million kilometers by Q1 FY '27.

3. Capex Plans: In the last quarter, Finolex invested INR 36 crores, with a total of INR 146 crores for the nine-month period, aligning with their projections. Management indicated that expenditures are concentrated on high-potential projects aimed at capturing market demand.

4. Future Revenue Potential: Management projected that the expanded capacity could generate an additional revenue of INR 600-700 crores annually. Improved market conditions for fiber pricing are expected to enhance margin profiles as utilization rates increase.

5. Response to Competition: While acknowledging the entry of new players in the market, management expressed confidence in their ability to coexist and maintain margins through strategic pricing and customer education on product quality.

These factors contribute to a confident outlook for sustained growth and operational improvements for Finolex Cables.

Key Questions and Answers from the Q&A Section

1. Question from Vidit Trivedi: "Any update on the BharatNet project as of now? And I just wanted to know your views on the way commodity is behaving and the overall outlook? And how many price hikes have we taken as of today?"

   Answer from Mahesh Viswanathan: "Currently, regarding commodities, they fluctuate greatly; recent prices have ranged from 12,800 to 14,000. We took 5 price increases last quarter totaling a 12% rise, while this quarter we've raised twice. As for BharatNet, we didn't secure phase 3 tenders initially, but with the current fiber market dynamics, we anticipate increased business opportunities over the next couple of years."

2. Question from Vidit Trivedi: "So what are the structural changes in the supply chain we have taken in this area? And can we expect further improvement, bring it down to at least 50 - 55 days in the coming quarters?"

   Answer from Mahesh Viswanathan: "We focused on optimizing each inventory segment: raw materials, work-in-progress, and finished goods. Improved raw material supply and operational efficiencies have contributed to reducing inventory days from 69 to 61. Achieving 50-55 days is challenging but we aim to streamline our processes further as capacity utilization improves."

3. Question from Vidit Trivedi: "There's a significant amount sitting in your capital work in progress, almost INR 307-odd crores. So what's the specific project it is tied to? And when can we expect it to be commissioned?"

   Answer from Mahesh Viswanathan: "Most of this is tied to our preform project. We are in production trials and expect to commission it by next month. Upon commissioning, about INR 220 crores will be capitalized, leaving only the fiber draw towers' costs."

4. Question from Shreya Wazir: "How do you see their capacities ramping up? And what product segments of Finolex will get affected and how?"

   Answer from Mahesh Viswanathan: "Competition is anticipated with companies like Birla and Adani entering the market. Birla may start operations next year, while Adani's timeline remains unclear. While there will be competition, we believe there's room for coexistence, and we plan to adapt accordingly to maintain our market position."

5. Question from Shreya Wazir: "What is Finolex's strategy to grow its Telecom Cable business? And how is Finolex building its product portfolio to participate in this opportunity?"

   Answer from Mahesh Viswanathan: "We are expanding our capabilities by producing preforms domestically, reducing import dependency, and increasing fiber draw capacity. Our integration efforts will help capitalize on the rising demand for telecom cables, particularly with the expected growth of data centers."

6. Question from Srinivasan: "I think, you had mentioned that some 4 million kilometers, we are going to 8 million kilometers by Q1 FY '26. So what is the revenue that we could generate from this asset?"

   Answer from Mahesh Viswanathan: "With our increased capacity, we estimate potential revenue from the new fiber capacity to reach around INR 600-700 crores annually. While profit margins can vary, we expect EBIT margins to improve as prices stabilize in the market."

7. Question from Veenit: "Given such a strong growth we've had within the industry, would it be right to assume that channel inventories would have been higher than it should?"

   Answer from Mahesh Viswanathan: "Yes, due to the price fluctuations and market dynamics, channel inventory levels are likely higher than usual. Specific volume estimates are difficult, but there has been a push in inventory as a response to rising commodity prices."

These questions and answers encapsulated key strategic updates and insights into Finolex's operational performance.