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    Bansal Wire Inds

    BANSALWIREGood
    Capital Goods·2 Aug 2024
    Management Summary

    Bansal Wire Industries Limited reported a strong Q1 FY25, with significant growth in revenue, net profit, and EBITDA, driven by increased volumes and margin expansion. The company is actively commissioning its new Dadri facility, which is expected to be a major growth driver, and is progressing with its specialty wire expansion, including steel cord and hose wire, aiming for substantial capacity and revenue increases in the coming years. Management expressed confidence in achieving higher growth and profitability, supported by a cost-plus model and strategic acquisitions.

    Highlights

    8
    • Net profit jumped 82% to Rs. 31 crores in Q1 FY25.

    • Revenue increased 49% to Rs. 817 crores in Q1 FY25.

    • EBITDA grew 127% to Rs. 62 crores in Q1 FY25.

    • EBITDA margin expanded by 260 basis points to 7.6%.

    • PAT margin grew by 70 basis points to 3.9%.

    • Total volume increased 140% year-over-year to 76,000 tonnes.

    • Dadri facility contributed 6,000 tonnes and achieved 13% utilization by quarter-end.

    • ROCE improved to 23.85% in Q1 FY25 from 18.46% last year.

    Key financials

    Single quarter

    07 metrics
    1. 01Revenue₹817 Cr+49%YoY
    2. 02Net Profit₹31 Cr+82%YoY
    3. 03EBITDA₹62 Cr+127%YoY
    4. 04EBITDA Margin7.6%
    5. 05PAT Margin3.9%

    Segment breakdown

    Q1 FY25 Volume Mix
    27,000 tonnes High Carbon Volume28,000 tonnes Mild Steel Volume21,000 tonnes Stainless Steel Volume
    List

    Guidance & targets

    11
    CategoryTargetPriority
    Capacity
    Total Installed Capacity
    6 lakh tonnes
    High
    Production
    Specialty Wires Production Start
    Q3 this year
    High
    EBITDA Growth
    Overall EBITDA Growth
    >80%
    High
    EBITDA Growth
    Absolute EBITDA Jump
    70-80%
    High
    Revenue
    Steel Cord Revenue
    Rs. 2,000 crores
    Medium
    EBITDA
    Steel Cord EBITDA (2 lakh tonnes facility)
    Rs. 700-800 crores
    High
    ROCE
    ROCE Level
    20-25%
    High
    Working Capital
    Working Capital Cycle
    Decrease
    High
    Steel Cord Approval
    Approval Process Duration
    1-1.5 years
    High
    Capex
    Total CAPEX for 2 lakh tonnes Steel Cord Facility
    Rs. 2,500 crores
    High
    Financial Performance
    Boost to Financial Performance
    Medium

    Risks & concerns

    3
    RiskSeverity

    Project execution delays for specialty wires (steel cord)

    Initial delay of ~1 month for specialty wire production due to container availability from China, but equipment is now arriving and installation is underway.Management acknowledged

    medium

    Long approval process for steel cord

    Steel cord requires a 1-1.5 year approval process from customers, which could delay full ramp-up, though management plans to produce hose wire in the interim.Management acknowledged

    medium

    Raw material price volatility

    Management states they operate on a cost-plus model, transferring raw material price changes to customers on the same day, and target 80-85% inventory with confirmed orders to mitigate commodity risk.Management acknowledged

    low

    Q&A highlights

    3

    “From 20,000 tonnes facility, revenue about Rs. 300 crores. From 200,000 tonnes facility, the revenue will go up to Rs. 3,000 crores. But again, this will be done in a phased manner. So, we will start with maybe 40,000 tonnes and then every four months, every six months, we will keep on adding 20,000 tonnes, 40,000 tonnes to scale up to 200,000 tonnes. At 2 lakh tonnes we will be able to do about Rs. 700 crores to Rs. 800 crores EBITDA.”

    Clarified the phased ramp-up and corrected the analyst's calculation, providing a more realistic EBITDA target for the full 2 lakh tonnes steel cord capacity.

    asked by Anant Mundra, Mytemple Capital

    3 min read7 chapters

    Detailed Narrative

    01

    Strong Q1 FY25 Performance Driven by Volume and Margin Expansion

    Bansal Wire Industries reported a robust Q1 FY25, with net profit surging 82% to Rs. 31 crores and revenue increasing 49% to Rs. 817 crores. This growth was underpinned by a 140% year-over-year increase in total volumes, reaching 76,000 tonnes. The company also saw significant margin improvement, with EBITDA growing 127% to Rs. 62 crores, leading to an EBITDA margin of 7.6% (up 260 basis points) and a PAT margin of 3.9% (up 70 basis points).

    02

    Dadri Facility Commissioning and Capacity Expansion

    The new Dadri manufacturing facility, the single largest in Asia, has commenced operations, contributing 6,000 tonnes to Q1 volumes and achieving 13% utilization by quarter-end. Management expects to surpass initial estimates for Dadri's ramp-up. The company projects its total installed capacity to increase from 2.5 lakh tonnes last year to 6 lakh tonnes by the end of FY25, representing a 2.5x capacity jump, which is anticipated to drive significant growth over the next 2-3 years.

    03

    Strategic Focus on High-Margin Specialty Wires

    Bansal Wire is aggressively expanding into specialty wires, particularly steel cord, which is currently largely imported or serviced by a single foreign player in India. The company aims to establish a 2 lakh tonnes steel cord facility in a phased manner, with a pilot project of 20,000 tonnes already underway. This segment is projected to generate Rs. 2,000 crores in revenue over the next 5-6 years with a high EBITDA percentage of 20-25%, and Rs. 700-800 crores EBITDA from the full 2 lakh tonnes capacity.

    04

    Interim Strategy for New Capacity Utilization

    Recognizing the 1-1.5 year approval process for steel cord, Bansal Wire plans to utilize the new Dadri infrastructure by producing hose wire in the interim. Hose wire, a related product, does not require lengthy approvals and can be ramped up quickly, ensuring immediate capacity utilization and revenue generation, albeit at a slightly lower EBITDA margin of 15-20% compared to steel cord's 20-25%. The company also plans to introduce IHT and OHT wires for electric vehicles by next year.

    05

    Improved ROCE and Working Capital Management

    The company has made a conscious effort to improve its Return on Capital Employed (ROCE), reporting a jump to 23.85% in Q1 FY25 from 18.46% last year, with a target to maintain ROCE at 20-25%. Management is also focusing on optimizing working capital, aiming for a decline in trade receivables and inventory, which is expected to reduce the overall working capital cycle from the current 70 days (30 inventory, 43 receivables, 12 payables) by the end of the year.

    06

    Consolidation of Group Companies and Diversified Business Model

    To streamline operations and consolidate financials, Bansal Wire is integrating sales from group companies, Bansal High Carbon and Balaji Wires, through job-work arrangements and planned leasing by Q3 FY25. These companies contributed approximately Rs. 40 crores EBITDA last year. The company maintains a highly diversified customer base with no single client accounting for more than 5% of sales, and operates on a cost-plus model to mitigate raw material price volatility, ensuring stable EBITDA margins.

    07

    Future CAPEX and Funding Strategy

    The total CAPEX for the Dadri project is Rs. 500 crores, with Rs. 250 crores already spent and the balance to be invested this year. The larger 2 lakh tonnes steel cord facility will require a substantial investment of Rs. 2,500 crores over approximately five years. Management expressed confidence in funding these ambitious CAPEX plans through internal accruals, indicating no immediate need to raise further capital.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.