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    Finolex Cables

    FINCABLESNeutral
    Capital Goods·14 Aug 2025
    Management Summary

    Finolex Cables delivered steady top-line and bottom-line growth of 13% in Q1 FY26, supported by strong volume growth in the electrical segment. However, profitability faced headwinds from a shifting product mix toward lower-margin project sales and increased competitive intensity in the wire segment. Management is aggressively investing in backward integration for fiber and expanding its retail footprint to counter these pressures.

    Highlights

    8

    • Revenue reached just under ₹1,400 crores, representing a 13% YoY growth.

    • PAT grew by approximately 13% YoY, tracking in line with revenue growth.

    • Electrical segment volumes increased by 16%, driven primarily by power cables.

    • Gross margins remained stable at approximately 20% compared to the previous year.

    • Retail 'box' sales mix declined from 75-80% to approximately 60%, impacting overall margins.

    • Ad and promotion spends nearly doubled to ₹20 crores from ₹11 crores in the previous year.

    • Total FY26 capex is planned at ₹300 crores, with a significant portion allocated to the fiber business.

    • FMEG portfolio reached approximately ₹250 crores in FY25, though growth remains below internal targets.

    Concerns

    1

    • Product Mix Shift to Projects

    What Changed2

    vs Q2 FY26

    Guidance items3 → 4 (+1)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    04 metrics
    1. 01Revenue₹1,400 Cr+13%YoY
    2. 02PAT—+13%YoY
    3. 03Gross Margin20%
    4. 04Ad and Promotion Spend₹20 Cr+81.8%YoY

    Segment breakdown

    Electrical Segment
    16% Volume Growth₹6,500 Cr Potential Turnover8x Asset Turn
    Communication Cables
    2% EBIT Margin
    FMEG
    ₹250 Cr FY25 Revenue
    List

    Guidance & targets

    4
    CategoryTargetPriority
    Margin
    Segment EBITDA Margin
    12%
    		Medium
    Capex
    Total Annual Capex
    ₹300 crores
    		High
    Capex
    Fiber Business Investment
    ₹325-350 crores
    		High
    Capacity
    Electrical Segment Potential Turnover
    ₹6,500 crores
    		Medium

    Risks & concerns

    6
    RiskSeverity

    Product Mix Shift to Projects

    Project sales are at deep discounts compared to retail 'box' products, diluting margins by 4-5 percentage points. — Management acknowledged

    high

    Copper Price Volatility

    Market resistance to immediate price hikes during copper spikes creates temporary margin pressure. — Analyst acknowledged

    medium

    FMEG Underperformance

    Growth in FMEG has been much lower than expected due to dependency on third-party sourcing and price erosion in lighting. — Both acknowledged

    medium

    Fiber Dumping from China

    Large-scale availability of dumped fiber from China has depressed global and domestic prices despite anti-dumping duties. — Management acknowledged

    medium

    Areas of Evasion(2)

    • Absolute numbers for cables vs wires for the quarter (claimed not to have them in front of him).
    • Specific value of cable required per megawatt for data centers.

    Q&A highlights

    3

    “The product mix and this is a trend that we've been seeing over the last few quarters. There is more of sales towards project and those are at discounted prices.”

    Explains why strong 16% volume growth only translated to a 1.5% jump in segment EBIT, highlighting margin dilution from project-heavy sales.

    asked by Vidit Trivedi

    1 min read5 chapters

    Detailed Narrative

    01

    Margin Dilution via Channel Mix Shift

    The company is experiencing a significant shift in its sales mix, with retail 'box' sales dropping from a historical 75-80% to approximately 60% of revenue. This shift toward project-based sales, which are sold at deep discounts, has resulted in a 4-5 percentage point hit to margins. Management expects this pressure to persist for at least another two quarters before stabilizing.

    02

    Strategic Capex and Backward Integration

    Finolex is executing a ₹300 crore capex plan for FY26, with ₹325-350 crores of a larger ₹500 crore program dedicated to the fiber business. A key focus is the new preform facility, which aims to eliminate dependence on imports and improve margins through value addition. The e-beam facility is also ramping up, with cured products available since March 2025.

    03

    Electrical Segment Capacity and Growth

    Despite competitive pressures, the electrical segment saw 16% volume growth. Management highlighted that the current gross block of ₹700-750 crores can support a potential turnover of ₹6,500 crores, implying significant headroom for growth without massive greenfield expansion. Utilization is improving as the company selectively takes on utility-side exposure.

    04

    FMEG and Lighting Sector Headwinds

    The FMEG portfolio, which reached ₹250 crores in FY25, continues to underperform internal targets. The lighting sector specifically faces 'enormous' price erosion, which has neutralized volume growth. To counter this, the company is expanding its retail footprint and moving toward in-house design to reduce dependency on third-party sources.

    05

    Communication Segment Awaits Government Orders

    The communication cables segment remains stagnant with margins of 1-2% due to slow execution of government programs like BharatNet Phase 3. While tenders have been won by various parties, Finolex expects orders for cable supply to flow in toward the end of the year after a 2-3 month prep time for electronics procurement.

    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.