RRKABEL - R R KABEL LIMITED Share Price

In the earnings conference call held on May 5, 2025, management provided an optimistic outlook for R R Kabel Limited, highlighting a year of significant growth and recovery. The company experienced robust performance driven by a 24% sequential volume growth in the Wires & Cables segment and saw its revenue for Q4 FY '25 reach INR 2,218 crores, a growth of approximately 26.4% year-on-year. For the entire fiscal year, consolidated revenue reached INR 7,618 crores, marking a 15.5% increase.

Looking forward, management set ambitious targets as part of their 'Project Rise' strategy, aiming for a revenue CAGR of 18% in the Wires & Cables segment and 25% in the FMEG segment over the next three years. This initiative aims to drive a 2.5x growth in EBITDA, largely supported by strategic capacity expansions and an optimized product mix. The total capex planned for FY '26 to FY '28 is INR 1,200 crores, which will enhance the company's manufacturing capabilities.

Management emphasized the Wires & Cables industry, currently valued at INR 90,000 crores, is expected to grow at a CAGR of 15%, potentially reaching INR 2 lakh crores by FY '31. They reported that the Wires & Cables segment accounted for 88% of revenue, with exports contributing 26% to the total revenue for FY '25, suggesting a stable outlook despite global uncertainties.

Additionally, management approved a dividend of INR 3.5 per share, reflecting confidence in the company's financial health. The positive macroeconomic signals, combined with internal growth strategies, support their constructive outlook for continued growth and margin expansion moving forward.

Question 1: "On the capex announcement of INR1,050 crores with 36,000 tons capacity, how should we look at this in terms of asset turnover?"

Answer: "We view the expansion plan in totality, including Silvassa and Waghodia, targeting around INR4,500 crores in top-line growth, which is approximately 3.5x. Wires typically have a different asset turn than cables, and with this combined capacity, we aim for an average asset return of 3.5x."

Question 2: "Was there any inventory gain in this quarter?"

Answer: "I'd say it wasn't exactly an inventory gain. The upward trend in copper prices led to increased demand and stockpiling by traders, helping margins. However, the primary driver of margin improvement was our significant volume growth."

Question 3: "Your staff cost appears to have improved. How do you explain this, and should we consider it a new normal?"

Answer: "We caution against comparing staff costs in percentage terms as fixed costs don't change with volume growth. In absolute terms, costs may have decreased slightly due to provisions, but overall, we expect operational norms to remain stable."

Question 4: "What are the key drivers for the forecasted 18% CAGR in Wires & Cables growth?"

Answer: "The 18% CAGR will be primarily driven by cable growth, as the industry is approximately 65% cables versus 35% wires. Our expansion plans are mainly targeted at increasing cable production, capitalizing on this existing market gap."

Question 5: "What improvements can we expect in the margins across domestic and export markets?"

Answer: "Our export margins are typically higher, but as our cable share increases, we expect margins to improve. For domestic sales, scaling up will enhance pricing and efficiency, forecasting solid margin improvements in both segments."

Question 6: "Can you provide specific volume growth figures for wires and cables this quarter and for the full year?"

Answer: "For FY '25, we recorded a volume growth of around 7%, with 1-2% in wires and nearly 19% in cables. This quarter alone, we achieved 14% volume growth, approximately 13% in wires and 15% in cables."

Question 7: "Will the increase in payables remain sustainable moving forward?"

Answer: "Yes, we expect our payables to remain stable. Our arrangements with suppliers have improved operational efficiency, contributing to better working capital cycles, which we anticipate will stay consistent even with high year-end volumes."

Question 8: "Your EBITDA guidance suggests 300 basis points improvement. How do you plan to achieve this?"

Answer: "We aim to achieve double-digit EBITDA margins of around 10.5% by FY '28, with annual improvements of about 100 basis points driven by higher volumes, a better product mix, and increases in profitability particularly in the FMEG segment."

Question 9: "What is the volume growth target for the cable business over the next 2 years?"

Answer: "We are targeting a 25% year-on-year volume growth in our cable business over the next two years, balancing this growth with our existing capacity and favorable market conditions."

Question 10: "What changes to payables can we expect over the upcoming financial year?"

Answer: "We anticipate stable payables. Our operational strategies have allowed for improved working capital management, which, while resulting in higher total numbers at peak volume periods, aligns with our longer-term financial health goals."