While the Q4 numbers are very good I think the guidance indicates conductor margins may go down to 8% like Q3 in Q1 and down to 6% further on. This is why the market has reacted as it did today. These margins are not as bad as the 3-4% or so in the past
The cables business alone ought to be worth more than 10k Cr if you take the cables topline of 4500 Cr next year with a 10-12% margin (relative valuation like KEI at 2.5x sales). I do believe the competetion for cables and wires in exports is lesser and this must be sustainable.
However, the conductors clearly will go down as indicated since the biggest tailwind contributor was duty on Chinese products and looks like they have now found a way to circumvent tariffs by buying players in Vietnam and South Korea and exporting from China to them and doing minimal value-add and exporting to US. The roundabout logistics will make them less competetive no doubt but still what happened last quarter is clearly a one-off when it comes to conductors.
I believe 3000 is fair valuation here but will be the top here until market sees next 2 quarter numbers and develops confidence.
Disc: Exited most of my holdings but think this can be a good value buy for a trade if market continues to over-react in the next 3-6 months
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