Release Date: October 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Polycab India Ltd (BOM:542652, Financial) reported a 30% year-on-year increase in consolidated revenue for Q2 FY25, driven by strong performance across all business segments.
- The company achieved its highest-ever quarterly PAT of INR4,452 million, with a PAT margin of 8.1%.
- The wires and cables segment recorded a robust 23% year-on-year growth, with the domestic business registering a remarkable 28% year-on-year growth.
- Polycab India Ltd (BOM:542652) has a strong net cash position, improving to INR24.3 billion compared to INR16.4 billion in Q1 FY24.
- The company is on track to achieve its projected goal of INR200 billion in revenue for the current year, setting a strong foundation for future growth.
Negative Points
- EBITDA margin declined by 90 basis points sequentially, primarily due to increased advertising and promotional expenses in the FMEG segment.
- The retail wires business faced heightened competitive intensity, leading to margin compression.
- Lower contribution from the higher-margin international business impacted overall margins, with international business contribution dropping from 9.3% in Q2 FY24 to 6.1% in Q2 FY25.
- Higher losses in the FMEG business were reported due to increased organizational expenses.
- The high growth in lower-margin institutional business relative to the channel business also contributed to the decline in margins.
Q & A Highlights
Q: Can you provide a breakdown of the cable and wires categories for the first half of this quarter and how it compares to the previous quarter?
A: The growth in the wires segment was almost double that of the cable segment, with wires showing a 2x growth compared to cables. The mix for wires and cables generally remains around 70% to 30%, with a slight improvement in wires mix by about 100 basis points this quarter. Demand is strong across sectors, with higher exposure in manufacturing and real estate.
Q: What is the outlook for the power transmission and distribution sectors, and how does Polycab's exposure look in these areas?
A: Polycab has lower exposure in power transmission but is well-presented in distribution, particularly with ongoing EPC projects. The distribution sector contributes double digits to the overall cables and wires business. The company is optimistic about future growth driven by government schemes and private investments.
Q: What are the CapEx plans for FY25 and FY26, and how does the optic fiber business fit into this?
A: Polycab plans to invest INR10 billion to INR12 billion in CapEx for FY25, primarily in the cables and wires business, with a similar amount planned for FY26. The optic fiber business currently contributes a small portion to the top line, but there is potential for growth if significant orders are secured from projects like BharatNet.
Q: How did the competitive intensity in the wires segment affect margins, and what is the outlook for pricing discipline in cables?
A: The wires segment faced heightened competitive intensity due to a sharp increase in copper prices, leading to margin compression. However, the cables segment is less affected by such volatility due to its market dynamics and expected demand growth. The company does not foresee similar pricing issues in cables.
Q: What is the current order backlog for the RDSS business, and how does the order pipeline look?
A: As of September, the RDSS business has an open order book of approximately INR48 billion, to be executed over the next two to three years. There are still many orders in the pipeline, and the company is optimistic about securing additional contracts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
