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    R R Kabel

    RRKABELGood
    Capital Goods·29 Jan 2025
    Management Summary

    R R Kabel reported its highest-ever nine-month revenue for FY25, demonstrating resilience despite a challenging macroeconomic environment. The company achieved a 9.1% YoY revenue growth in Q3 FY25, driven by both its Wire and Cable and FMEG segments. While Q3 margins saw a marginal reduction due to earlier commodity price volatility, sequential improvements indicate stabilization. Management remains confident in achieving future growth and profitability through strategic initiatives, capacity expansion, and a focus on high-margin products.

    Highlights

    8
    • Q3 FY25 Revenue reached ₹1,782 crores, reflecting a 9.1% year-on-year growth.

    • Nine Months FY25 Revenue grew by approximately 12% to ₹5,400 crores, marking the highest ever revenue for the period.

    • Q3 FY25 Operating EBITDA stood at ₹111 crores, with PAT at ₹68.6 crores.

    • Wire and Cable segment Q3 FY25 revenue was ₹1,543 crores, an 8% YoY growth, with segment profit at 7%.

    • FMEG segment Q3 FY25 revenue was approximately ₹240 crores, delivering consistent growth of 20-25% quarterly.

    • FMEG segment 9M FY25 revenue growth was approximately 25% YoY, driven by strong volume performance in fans (45% of FMEG revenue).

    • The company aims to achieve breakeven in the FMEG business by early FY26 (Q1 FY26 / June '25 quarter).

    • A capex of approximately ₹1,200 crores is planned over the next three years, with 80% allocated to the cable segment, expected to generate ₹4,000-4,500 crores in additional annual revenue.

    What Changed2

    vs Q4 FY25

    Guidance items18 → 15 (-3)Risks discussed3 → 4 (+1)
    Key financials

    Metrics

    6

    Periods

    2

    Headline

    5
    • Revenue
      ₹1,782 Cr
      YoY+9.1%
    • Operating EBITDA
      ₹111 Cr
    • PAT
      ₹68.6 Cr
    • Wire and Cable Segment Profit
      7%
    • Working Capital Days
      60 days

    9M

    1
    • FY25 Revenue
      ₹5,400 Cr
      YoY+12%

    Segment breakdown

    • Wire and Cable₹1,543 Cr86.5%
    • FMEG₹240 Cr13.5%
    Donut· Share of Revenue (Q3 FY25)

    Guidance & targets

    13
    CategoryTargetPriority
    FMEG Profitability
    Breakeven
    Breakeven at EBITDA level
    High
    Volume Growth
    Overall Volume Growth
    Approx. 15%
    High
    Volume Growth
    Overall Volume Growth
    10% to 12%
    High
    Wire and Cable Margin
    Segment Profit Margin
    Approx. 8%
    High
    FMEG Revenue Growth
    Revenue Growth
    20% to 25%
    High
    Capex
    Total Capex
    Approx. ₹1,200 crores
    High
    Revenue from Capex
    Additional Annual Revenue
    ₹4,000 crores to ₹4,500 crores
    High
    Cable Segment Contribution
    Revenue Contribution from Cable Segment
    30% to 35%
    Medium
    Capex Allocation
    Capex Allocation to Cable
    Almost 80% of ₹1,200 crores
    High
    Cable Capex Return
    Revenue Return on Cable Capex
    3x to 3.5x
    High
    Export Mix
    Cable Export Contribution
    35% (from current 30%)
    Medium
    Company Level Cable Sales Ratio
    Cable Sales Ratio
    35% (from current 30%)
    Medium
    FMEG Capex
    FMEG Capex
    ₹20-25 crores only
    High

    Risks & concerns

    4
    RiskSeverity

    Challenging Macroeconomic Environment & Volatile Commodity Prices

    Slowdown in economy, political transitions, and volatile commodity prices (copper) impacted performance, especially in H1 FY25, leading to marginal margin reduction.Management acknowledged

    medium

    Export Market Headwinds

    Weak economic conditions, shipment delays, and logistical disruptions (Red Sea crisis) affected export demand, though Q3 saw 11% YoY growth and conditions are easing.Management acknowledged

    medium

    Potential Overcapacity in Wire Segment

    Analyst raised concern about overcapacity in Indian wire industry; management emphasized B2C brand focus, quality, and organized sector growth as differentiators.Analyst downplayed

    low

    Industry Capex leading to Oversupply in Cable Segment

    Analyst questioned if high industry capex would lead to short-term margin pressure; management asserted demand from government infrastructure, solar, and exports would outstrip supply for 3-4 years.Analyst downplayed

    medium

    Q&A highlights

    3

    “So our like on nine months versus nine months, our total growth is around 5%, where cable is 20% and wire is negative in the range of 3%. But when we see in terms of export and domestic, then like wire in domestic and export, both were impacted by almost negative 9%, while cable have grown in domestic, it is 18% and in export, it is 7%.”

    Reveals specific underperformance in the wire segment (domestic and export) for 9M FY25 and management's view on industry trends, attributing it to H1 impact.

    asked by Achal Lohade

    3 min read7 chapters

    Detailed Narrative

    01

    Q3 FY25 Performance Overview

    R R Kabel reported its highest-ever revenue for the nine-month period of FY25 at ₹5,400 crores, marking a 12% YoY growth. For Q3 FY25, revenue reached ₹1,782 crores, a 9.1% YoY increase. Operating EBITDA stood at ₹111 crores, and Profit After Tax (PAT) was ₹68.6 crores. The company noted a marginal reduction in EBITDA and PAT primarily due to volatile commodity prices in H1 FY25, but sequential growth in margins indicated a stabilizing trend.

    02

    Wire and Cable Segment Dynamics

    The Wire and Cable segment recorded a Q3 FY25 revenue of ₹1,543 crores, an 8% YoY growth, and a 9M FY25 revenue of ₹4,732 crores, up 10% YoY. Segment profit for Q3 FY25 was 7%. Volume growth for 9M FY25 was around 6% overall, with cable growing 20% and wire showing a negative 3%. Domestic cable volume grew 18%, while domestic wire declined by 1.9%. Exports, contributing 27% to Q3 revenue, saw an 11% YoY increase despite global challenges🌐, with cable exports growing 7% and wire exports declining by 9%.

    03

    FMEG Segment Growth and Breakeven Path

    The FMEG segment continued its robust growth trajectory, delivering approximately ₹240 crores in Q3 FY25 revenue, maintaining a consistent 20-25% quarterly growth. For the nine months of FY25, FMEG revenue grew approximately 25% YoY. Fans remained the largest contributor at 45% of segment revenue, followed by lights (32%) and appliances/switches (23%). The company is committed to achieving breakeven in the FMEG business by Q1 FY26 (June '25 quarter) at the EBITDA level, supported by operational cost savings and an optimized product mix.

    04

    Capex and Capacity Expansion Plans

    R R Kabel plans a significant capex of approximately ₹1,200 crores over the next three years, starting April 2025. This investment is expected to boost the top line by an additional ₹4,000-4,500 crores annually. A substantial portion, almost 80%, of this capex will be directed towards the cable segment, primarily for brownfield expansion at its Waghodia facility. The company anticipates a revenue return of 3x to 3.5x on cable capex. Current capacity utilization stands at 65-70% for wires and 90-95% for cables.

    05

    Export Market and US Certifications

    Exports contributed 27% to Q3 FY25 revenue, growing 11% YoY, with Europe being the largest market (over 50%) and the US contributing about 10% of export revenue. The company is actively securing new certifications for the US market, with one to two product certifications already received and more new products planned for the US market from next year. Management expects export growth to normalize, backed by these additional certifications and easing Red Sea crisis impacts and freight charges.

    06

    Margin Outlook and Drivers

    Management expressed optimism about future margin improvements, targeting an approximate 8% segment profit in the wire and cable business for Q4 FY25. The company aims to achieve double-digit EBITDA margins in the coming years, first in the wire and cable segment, and then at the company level by FY28. Key drivers for margin expansion include a favorable product mix with high-margin products like export cables and solar cables, along with benefits from increased scale and operational efficiencies.

    07

    Industry Demand and Supply Outlook

    Despite a moderated GDP growth and slowdown in H1 FY25, the demand for cables and wires remains resilient. Management anticipates a significant boost from higher government spending on infrastructure and housing activity in coming quarters. They believe that even with planned industry-wide capacity additions, there will be a supply shortage for cables for the next three to four years, driven by government initiatives in solar power generation and infrastructure, as well as growing export opportunities.

    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.