Delton Cables – Undervalued High growth stock?

Delton Cables (BSE: 504240) is a veteran in the Indian low-voltage cables market, with a rich history spanning over 75 years. The company has successfully transformed itself from a telecom cables specialist into a customized branded supplier for high-growth sectors like railways, EPC, telecom etc.
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Positives:

• Diversified Product Portfolio: The company’s versatile range of cables caters to diverse industries, including EPC, Railways, Telecom and in future, possibly into emerging sectors like Nuclear and Defense
• Asset-Light Expansion: Delton’s phased capex plan and focus on an asset-light model aim to improve asset turnover and capacity utilization, which stood at 76% in FY24.
• Improving Working Capital: The company has reduced its working capital cycle from 218 days in FY22 to 138 days in FY24, supporting its future growth.
• Transformation & Growth: Delton has now focused on large private EPC players, added new management talent, and built a niche product portfolio targeting high-growth segments to drive revenue growth, profitability, and working capital efficiency.

Negatives:

• Raw Material Price Volatility: Delton’s profitability is susceptible to fluctuations in the prices of key raw materials like copper and aluminium.

Risks:

• Increasing Competition: The company faces competition from both organized and unorganized players in the cables and wires industry. Delton having a very small mcap, has limited ammo to indulge in a pricing war.
• Execution Challenges: The success of Delton’s new manufacturing facility for EPC cables, expected to commence production in September 2024, will be crucial to its expansion plans.

Overall, Delton Cables appears well-positioned to capitalize on India’s infrastructure growth story, given its diversified product offering and asset-light expansion strategy. What makes it stand out is it’s relatively lower Price to Sales of around 1, and a it’s board has some names with good industry experience, which gives some confidence while investing.

Disclosure: Inveseted, may be biased