Polycab hosted a conference call
on Oct 19, 2023. In the conference call the company was represented by Inder T.
Jaisinghani, CMD and Gandharv Tongia, ED.
Key takeaways of the conference
call
Strong topline growth was driven
by strong volume growth in wires & cables business especially domestic.
Strong volume growth drove the
revenue of Wires & Cables revenue in Q2FY24. Overall domestic volume growth
was 30% in W&C. W&C witnessed continued strong demand
supported by government capex and robust real-estate off-take enabled
sustenance of growth momentum.
Domestically, both distribution driven business and institutional
business exhibited strong performance.
Cables growth continued to
outperform wires growth. Polycab special purpose cables reported strong growth
in H1FY24.
Revenue from international
business contributed 9.3% of the consolidated W&C revenue for the quarter.
The Company expanded its global footprint to 76 countries
Brand Etira, optima and green wire
which together accounted by 30% of sales.
FMEG business exhibited marginal
growth of 8% YoY in Q2FY24, in-spite of the larger businesses of Fans and
Lights showing de-growth due to continued weakness in consumer demand.
Some of the products in FMEG are
seasonal demand and some equal throughout the year. Fans are seasonal. The
lights demand is expected to be good during festive season and the company is
well prepared to capture it.
Switchgears and Conduit Pipes
& Fittings showed remarkable growth during the quarter, both on YoY and QoQ
basis.
Switches business too exhibited
excellent growth, with sales growing ~2x YoY, on a strong base. Luminaires
business had a strong quarter, benefitting from the set-up of its separate GTM
vertical, under Project LEAP
Geographically the W&C growth
was broad based, with highest growth coming from North region. Geographically,
both West and South regions showed yearly as well as sequential growth in FMEG
business during Q2FY24, while the North region showed sequential growth.
Improvement in mix towards higher
margin products contained bottom-line de-growth for FMEG despite higher A&P
spends during the quarter.
W&C Margins improved by about
300 bps YoY in Q2FY24 led by better operating leverage and improvement in product-mix
Three new fans models launched of
which one in BLDC segment.
Market dynamics is in favour and
the demand is good for the products of the company.
With in cables the demand is coming
from across the segments and industries i.e. T&D, real estate, railways,
metros government segment.
Sustainable EBITDA margin irrespective
of commodity price movement is in the range of 11-13%.
In Q2FY24 Copper price was up 8%
but aluminum prices was lower.
Cables and wires registered a
revenue growth of about 30%yoy and 20%yoy.
Distribution realignment is
completed in case of FMEG.
Government increasing capex in
infra in the last 3 years. This is structural demand driver for the W&C
industry. Private capex is also picking
up adding further demand for cables.
Backward integration in W&C
is 100%.
Capacity utilization of W&C
is currently around 65-70% and it could go up to 95%.
The company plans to incur capex
of 600-700 crores each year for next two years. Investment in capacity for EHV
and Special purpose cables.
Lighting division – led new
technology has come in. which has led to pricing correction almost by
20-22%. That pricing correction is done
with and now the situation is improving.
Fans and lights are largest
contributor for FMEG and now the company is increasing the switch and
switchgear. Now FMEG is entirely in-house manufacturing and
once there is scale up of volume there will be better cost absorption leading
to margin improvement along with premiumisation.
Excluding A&P spend there is
improvement in EBIT of FMEG and it will be in profit.
Expect to achieve its FY26
revenue target of Rs 20000 crore ahead of time and plans to announce new target
within next few quarters.
|