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Finolex Cables Limited Analysts/Investors Meet Summary
Meeting Overview • Date: May 27, 2024 • Participants: • Mr. Mahesh Viswanathan (Deputy CEO and CFO) • Ms. Mamta Samat (Moderator, Perfect Relations Pvt. Ltd.) • Focus: Discussion of earnings for Q4 and financial year ending March 31, 2024. • Transcript Availability: Accessible on the company's website.
Financial Performance • Revenue Growth: • Q4: 15% increase • Full Year: 12% increase, surpassing INR 5,000 crores • Volume Growth: • Electrical wires: Up 15% • Cables: Up 50% • Optic fiber cable (OFC): Down 30% due to tender issues. • Profit: • Q4: INR 196 crores (up 13%) • Full Year: INR 753 crores (up 17%) • Cash Flow Management: • 11 days of receivables • 46 days of inventory
Expansion and Market Opportunities • Projects: E-beam technology and fiber capacity enhancements expected to boost production. • Fiber Market Potential: Estimated demand of 60-70 million kilometers; current capacity at 20-22 million kilometers. • Dividend Recommendation: 400% payout suggested by the Board.
Market Share and Growth Aspirations • Wires Market Share: Maintained without significant changes. • FMEG Segment Target: Exceed INR 500 crores in 2-3 years. • Growth Expectation: Aim for growth at twice the nominal GDP rate.
Sector Demand and Pricing Trends • Demand Outlook: Strong in construction and automotive sectors; recovery in agriculture. • Pricing Adjustments: Responding to fluctuating LME prices; margins expected to normalize.
EHV Cables Joint Venture • Order Book: Confirmed orders of INR 280 crores; additional INR 190 crores pending. • Execution Challenges: Regulatory permissions affecting project timelines. • Market Size: EHV market valued at INR 3,500 to 4,000 crores.
Margins and Distribution Strategy • Sustainable Margins: 12-13% margin band despite copper price volatility. • Distribution Improvements: Enhanced engagement with distributors and increased marketing spend. • Non-recourse Financing: Program to support dealers without credit risk.
Competitive Landscape and Retail Engagement • EHV Cables Market: Major players include Universal Cables, KEI, and KEC. • Retail Performance: Need for improved conversion rates and engagement with decision-makers.
Conclusion • Channel Partner Growth: Engaging over 200,000 partners; only 50% billing due to conversion challenges. • Future Focus: Tailoring marketing schemes and enhancing engagement with influencers and electricians.
Finolex Cables Limited Q3 FY 2023-24 Earnings Conference Call Summary
Financial Performance • Revenue: • Q3 revenue: INR 1,222 crores (3% increase QoQ, 6% YoY) • Nine-month revenue: INR 3,613 crores (11% growth) • Volume Growth: • Electrical cables: 8% growth • Communication cables: Flat performance due to tender delays
Capacity and Efficiency • Current Capacity Utilization: 65-66% • Working Capital Improvements: • Inventory reduced from 1.8-1.9 months to 1.5 months • Receivables decreased from 15-16 days to 14 days • Distributor and Partner Network: • 730 distributor accounts • Approximately 4,500 channel partners (2,000 active)
Segment Performance • Growth Areas: • Auto and agricultural segments outperformed • Construction segment saw a slight dip • Margin Impact: • Lower-margin auto cables and project-related sales affected margins
Future Plans and Projects • Capacity Expansion: • 15% increase in volume capacity without issues • Auto cable capacity expansion expected by mid-2024 • New Initiatives: • Fiber production and e-beam technology projects underway • New compounding plant in Goa for insulation needs
Pricing and Market Dynamics • Cable Revenue: INR 150-180 crores annually • Copper Pricing: • 3-3.5% price drop in October, 2.5% increase in December • Optical Fiber Pricing: Stabilized at INR 270-275 per kilometer (20% volume drop in communication cables)
Market Outlook • BharatNet Project: Significant tender expected, potential revenue by Q2 • Sales Shift: Increased focus on automobile and agricultural wires • Operating Margins: Expected to remain stable despite higher advertising costs
Competitive Landscape • Revenue Mix: 60-65% from construction, remainder from automotive, agricultural, and industrial • Market Competition: Price-based competition; emphasis on quality and service for sustainable growth
Future Growth Projections • FMEG Segment: Smaller player facing price erosion but improvements in switches and switchgear • Wire Segment Growth: Anticipated mid-teens growth for FY '25 driven by construction and industrial demand
Margin Insights • Blended Margin: Around 12%, historical averages between 13.5% and 14% • Market Share: Stable despite fluctuations
Optical Fiber Strategy • Price Trends: Current drop linked to China's economic slowdown, expected to be temporary • Demand Projection: Increase from 20 million kilometers to potentially 50 million kilometers due to government projects • Backward Integration: Aiming for double-digit margins at 70-75% capacity
Advertising and Marketing Plans • Budget for 2025: INR 50-70 crores planned for advertising and marketing efforts