DDev Plastiks Industries – A Smallcap Gem

Thank you Mayank.

Below is the detailed summary of the Q1 FY25 earnings call for DDEV Plastiks Industries:

Key Financial Highlights:

• Revenue from operations: ₹625.41 crores (6% YoY growth)
• EBITDA: ₹62 crores (11% YoY growth), EBITDA margin of 10%
• PAT: ₹42 crores (7% margin)
• Capacity utilization: ~80% of 233,400 metric tons per annum installed capacity
• Volume growth: 18.5% YoY to 46,000 tons

Business Updates:

1. Wire and Cable Segment (79% of revenues):

   • Indian wire and cable sector projected to grow at 11% CAGR from ₹80,000 crores in FY24 to ₹1,20,000 crores by FY27
   • Transmission lines expected to expand from 15,000 km to 41,000 km by FY30 (16% CAGR)
   • Shift towards halogen-free flame retardant (HFFR) cables from PVC cables due to safety concerns

2. New Product Development:

   • Currently producing compounds for up to 72 kV cables
   • Working on compounds for 132 kV cables, with plans to move to 220 kV in the future
   • HFFR capacity of 5,000 tons operational, achieved volume of 618 tons in Q1

3. Capex Plans:

   • ₹300 crores planned over next 3 years (₹125 crores for FY25)
   • New greenfield sites in east and west India
   • Debottlenecking efforts ongoing

4. Export Market:

   • Exports constitute 24% of total sales
   • Pursuing UL (Underwriters Laboratories) approval for direct exports to the US market
   • Two product approvals in process, expected by end of calendar year

5. Other Updates:

   • Launched revamped website on August 1, 2024
   • Became net debt-free in Q4 FY24
   • Reduced finance costs by 38% YoY to ₹4.49 crores in Q1 FY25

Forward-Looking Statements:

1. Revenue growth projection of 12-15% CAGR over next 5 years
2. Volume growth target of 18-20% for FY25 (180,000-185,000 tons)
3. EBITDA margin expected to stabilize around 11-12%
4. HFFR capacity to be ramped up to 20,000 tons by FY26 end
5. Plans to enter 132 kV and 220 kV cable compound markets
6. Expecting to improve market share in 72 kV cable compounds
7. Aiming for higher-margin product mix to improve overall profitability

Business Concerns:

1. Margin pressure due to increased shipping costs (impact of ~0.5% on EBITDA margin)
2. Geopolitical tensions affecting exports to Middle East and transit times
3. Intense competition from international players like Dow Chemicals, LG, Hanwha, and Borealis
4. Raw material price volatility impacting realizations
5. Potential backward integration by some customers (e.g., Polycab)
6. Limited ability to pass on increased costs in Middle East and Latin American markets
7. Time-consuming approval process for new high-voltage cable compounds
8. Lower margins in certain product segments (e.g., anti-fibrillation compounds)

The management remains optimistic about long-term growth prospects driven by infrastructure development, renewable energy push, and shift towards safer cable compounds. They are focusing on moving up the value chain, expanding HFFR capacity, and entering new markets like the US to improve overall margins and competitiveness.