Dynamic Cables Limited Q2 FY’25 Earnings Conference Call Summary

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Financial Performance and Growth

• Dynamic Cables Limited held its Q2 FY’25 Earnings Conference Call on October 23, 2024, hosted by PhillipCapital (India) Private Limited.
• The company’s Managing Director, Ashish Mangal, reported a strong growth trajectory, with a record order book and sustained business visibility, driven by investments in the power sector.
• The company’s financial performance for H1 FY’25 included a 32% increase in sales, 35% rise in EBITDA, and a 54% increase in PAT, with an order book of Rs. 595 crores as of September 30, 2024.
• The company has launched DC solar cables, designed for solar power plants, and is expanding into new product categories that align with industry needs.
• The company’s capacity expansion is on track, with an expected completion by Q2 FY’26, and is expected to add Rs. 200-250 crores of additional terminal capacity.
• The company’s working capital days are expected to remain around 100 days, with a sustainable number for working capital days.
• The total addressable market for solar cables is estimated to be around Rs. 10,000 crores globally and Rs. 1,500-2,000 crores in India.

Order Book and Exports

• Dynamic Cables Limited’s management reports a healthy order book, with around 15% comprising export orders, and the rest being domestic.
• The company’s export growth was affected by high sea freight rates, but management expects it to pick up in the next quarter as rates normalize.
• The majority of the company’s growth is driven by volume, with the majority of the order book in line with the revenue mix.

Investments and Expansion

• Management plans to invest around Rs. 35-40 crores in CAPEX for FY’25 and is also planning for the next phase of growth, including a potential greenfield project.
• The company is exploring new opportunities in solar cables, data centers, and semiconductors, with plans to launch solar cables soon and potentially requiring separate capacity for future growth.

Financial Outlook and Guidance

• Management does not provide specific guidance on revenue and PAT for FY’25 but expects the second half to be better than the first half, with no capacity constraints expected.
• The company has around Rs. 100 crores of cash on its books, which will be used for margin for LC and BG facilities, CAPEX, and working capital needs.
• Dynamic Cables Limited expects to maintain a growth trajectory of around 20% CAGR over the next three to four years, similar to the past six years.
• The company’s margins are expected to remain stable between 10% to 10.5% due to the competitive nature of the industry and the difficulty in pushing margins further in a B2B business.

Product Development and Order Book

• New product developments, such as railway signaling, covered conductors, and solar cables, are contributing to revenue growth and are expected to continue doing so.
• The company’s order book execution cycle is around six to nine months, and the current order book stands at Rs. 595 crores, which only includes confirmed orders.
• The demand scenario for the coming year is encouraging, with a strong order book and a growing CAPEX program driven by distribution line upgrades, replacements, and new electrification projects.

Industry Outlook and Growth Targets

• The cable industry is expected to grow by 12%-14% over the next few years, with Dynamic Cables aiming for 18%-20% growth.
• Finance costs are expected to remain stable, with potential reductions due to better debt terms.
• Dynamic Cables is not planning to enter the house wires market soon and is focusing on maintaining profitability and growth through ongoing CAPEX programs.

R&D, Customer Concentration, and Product Focus

• The company is in the R&D stage for data center cables and maintains a 100% pass-through for commodity price fluctuations.
• Approximately 40% of revenue comes from the top five customers, with customer concentration varying annually.
• Dynamic Cables Limited’s capacity is flexible, allowing production of both railway signaling and power distribution cables, with railway signaling contributing 4-5% to the current year’s turnover.
• The railway signaling market is large, estimated over Rs. 2,000 crores, but specific order details from railways are not disclosed.
• The company uses the latest technology for solar cables and is not involved in the capacitor segment.
• Exports amount to Rs. 80 crores, primarily to Asia and Africa, with power distribution cables being the major revenue sector.
• Future contributions from renewables are expected to be significant, but specifics are not yet available.