RRKABEL - R R KABEL LIMITED Share Price

In the Q3 FY26 earnings call, management provided an optimistic outlook for R R Kabel Limited. The Managing Director, Mahendrakumar Kabra, indicated that India's economic fundamentals remain strong, highlighting growth in consumption, investment, and manufacturing. The wires and cables segment has shown robust performance due to significant volume expansion in infrastructure and construction, achieving a consolidated revenue of INR 2,536 crores for Q3 FY26, marking a 42.3% year-on-year increase compared to INR 1,782 crores in Q3 FY25. For the nine-month period, revenue reached INR 6,758 crores, a 25.1% increase compared to INR 5,400 crores in the same period last year.

The company's EBITDA for Q3 FY26 increased to INR 206 crores, an 86% rise year-on-year from INR 111 crores, while the nine-month EBITDA reached INR 526 crores, up 80% from INR 292 crores in FY25. Profit after tax for Q3 FY26 stood at INR 118 crores, a 72.4% increase year-on-year, and INR 324 crores for nine months, reflecting a 77.7% rise compared to INR 183 crores in FY25.

Management acknowledged the challenges within the FMEG segment but noted ongoing improvements in operational efficiencies, targeting breakeven in this segment by Q4 FY26 amidst controlled loss reductions. Key forward-looking points included expectations of continued demand driven by infrastructure spending, housing growth, and an ongoing shift towards organized products. Additionally, capital expenditure aligns with capacity and efficiency enhancements to meet demand growth targets. The focus is on disciplined execution, with expectations of steady performance as the macroeconomic environment stabilizes. Therefore, while short-term variability might persist, the long-term outlook for the electrical industry in India is promising, with a focus on sustainable value creation and competitive strengthening.

Q1: Natasha Jain from PhillipCapital: Can you detail the current demand for Wires & Cables and the channel's inventory position given the copper price rise?

A1: We are experiencing strong demand across sectors like real estate and industrial, supported by a good export market. However, the recent 20-25% price increase in copper has pressured our channel's working capital. We are managing this by passing on price impacts to consumers; however, the timing varies. Despite volatility, demand remains firm, as wire and cable costs are only 1-1.5% of total project expenses, so consumption won't reduce dramatically despite ongoing price fluctuations.

Q2: Natasha Jain: How quickly can price increases be passed on to the channel and consumer, and will future housing projects slow due to this?

A2: The pass-through of price increases is an ongoing process, not immediate due to the nature of project costs as previously mentioned. Demand for wires and cables should persist; any inventory adjustments by dealers may vary, but this won't significantly affect overall demand in the long term.

Q3: Natasha Jain: Are we still on track for the projected 15% CAGR for the industry in 2026?

A3: Yes, we anticipate that if India maintains a 7-8% growth rate, the wire and cable industry will align with a 14-15% CAGR. For us, with a 30% volume growth this quarter, we are likely to achieve around 17-18% volume growth over the 9-month period, which aligns with our strategy.

Q4: Dhruv Jain from Ambit Capital: What was the volume growth this quarter, and how does it compare across segments?

A4: We reported an overall volume growth of over 30% in the Wire & Cable segment, with wire and cable growing by 30% and over 25% respectively. We saw domestic value growth exceed 50% and export growth around 25%, indicating robust performance in all segments.

Q5: Dhruv Jain: Why did margins dip slightly QoQ despite year-on-year increases?

A5: There was a minor dip in margins compared to the prior quarter due to the lag in passing through recent copper price increases, which were significant at 25%. The impact on margins was still favorable compared to the industry, reflecting our continued pricing discipline and operational efficiency.

Q6: Dhruv Jain: What is the current capacity utilization, and are you on track with capex plans?

A6: Currently, our capacity utilization is about 70% for wires and 90% for cables. We're committed to our INR1,200 crore capex plan over three years, focusing primarily on cable expansion to meet anticipated 18% annual volume growth.

Q7: Ashish Kanodia from Citibank: How much of the price hike was passed on in Q3, and any plans for further hikes in Q4?

A7: Price adjustments are a gradual, continuous process. We are implementing small increases regularly; thus, while we can't quantify percentage hikes precisely, we've raised prices in December and January due to copper volatility, reflecting ongoing market dynamics.

Q8: Achal Lohade from Nuvama Institutional Equities: How do you expect margins to evolve in Q4 amidst current price stability?

A8: If copper prices stabilize, we should not see adverse impacts on margins; our internal projections still aim for around 100 basis points improvement year-over-year. However, quarterly margin predictions are inherently challenging.

Q9: Rohit Charan: How would a significant drop in copper prices impact our business?

A9: A drastic decrease in copper prices could cause some pause in stocking behavior, impacting revenue. However, we believe in long-term demand stability. Additionally, any material price changes would necessitate adjustments in pricing strategy to protect margins.

Q10: Rahul Agarwal from IKIGAI Asset: What is the outlook for exports in the medium-term versus domestic growth?

A10: We anticipate export growth will outperform domestic growth for us, driven by ongoing market developments and potential tariff changes benefiting our products in key markets. We remain optimistic about maintaining strong export fundamentals.