R R Kabel Q1 FY25 Analysis: Key takeaways!!
Business Outlook:
- Reported highest-ever quarterly revenue of INR 1,808 crores, up 13% YoY
- Wire and cable segment remains core, contributing 87% to revenue
- FMEG segment growing rapidly at 32% YoY
- Management confident of outperforming industry growth rates
Strategic Initiatives:
- Launched innovative FireX LS0H-EBXL housewire to meet new safety regulations
- Expanding manufacturing capacity with INR 500 crore capex by March 2025
- Transitioning FMEG brand from Luminous to RR Signature
- Focusing on high-margin products and distribution expansion
Trends and Themes:
- Infrastructure and real estate boom driving demand for cables
- Shift towards safer, halogen-free wires in public/commercial buildings
- Growing exports, with R R Kabel being largest wire/cable exporter from India
- Increasing share of cables vs wires in overall product mix
Industry Tailwinds:
- Government focus on infrastructure and real estate development
- Potential for real estate to contribute double-digits to GDP
- Strong demand from sectors like railways, defense, solar power
- Export opportunities, especially in European markets
Industry Headwinds:
- Raw material price volatility, especially copper
- Container shortages and shipping delays impacting exports
- Slowdown in domestic wire segment
- Intense competition in FMEG space
Analyst Concerns and Management Response:
- Margin pressure in Q1: Management attributes to raw material volatility and product mix shift, expects recovery
- FMEG losses: Higher ad spend for brand transition, expects breakeven in 3-4 quarters
- Cable capacity constraints: New capacity coming online from September 2024 onwards
- Geographic concentration: Focusing on expanding presence in South and East India
Competitive Landscape:
- Positioned as 4th largest wire and cable company in India
- Strong presence in West and North India markets
- Rapidly growing FMEG business, transitioning to own brand
- Facing competition from established players in both segments
Guidance and Outlook:
- Targeting 60-80 bps EBIT margin improvement in wire & cable segment for FY25
- Expect 20% volume growth in exports
- Aiming for 25-30% revenue growth in FMEG segment
- Overall volume growth target of 20% for next 2-3 years
Capital Allocation Strategy:
- INR 500 crore capex plan on track, to be completed by March 2025
- Funded through internal accruals, no additional debt
- INR 300 crore cash outflow for capex in FY25
- New capex plans beyond FY25 under consideration
Opportunities & Risks:
Opportunities:
- Expansion in underpenetrated markets (South/East India)
- Growing export business
- New product launches in high-margin categories
Risks:
- Raw material price volatility
- Intense competition in FMEG segment
- Potential oversupply in wire & cable industry
Regulatory Environment:
- New Central Electrical Authority regulations mandating halogen-free wires
- Company well-positioned with FireX LS0H-EBXL product
Customer Sentiment:
- Strong demand in cable segment, especially from institutional customers
- Positive reception to RR Signature brand transition in FMEG
Top 3 Takeaways:
- Strong volume-driven growth despite challenges, confident of outperforming industry
- Margin pressure in short-term, but management expects recovery and improvement
- FMEG business scaling rapidly, breakeven expected in 3-4 quarters
| Subscribe To Our Free Newsletter |
