- Tariff Fears: The U.S. government is considering imposing new tariffs on copper imports, which is driving buyers to stockpile copper before the potential price increase. Traders are reacting by sending copper into the U.S. to take advantage of higher prices.
- High U.S. Demand: U.S. copper prices are higher than the global prices, which is attracting copper from other regions, particularly Asia and Europe, to take advantage of the price premium in the U.S.
- Decreasing Copper Exports from Chile: Chile, the world’s largest copper exporter, has been facing challenges, including labor unrest and lower copper ore grades. This has led to a decline in its copper exports, tightening global supply.
- China’s Increasing Demand: China’s copper demand is rebounding, leading to an increase in copper purchases, which is further tightening the global copper supply.
But Dynamic Cable will have no impact because 80% of the raw material is aluminium and 20% is copper and all increase in the price is fully passed on that’s why they are able to maintain the margin of 10% over last 4-5 quarters.
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Q4 FY 25 Performance highlights
Business Performance
- Revenue growth was 37% for Q4 on YoY basis and 32% on Qoq basis. Healthy Operating Cash flows of 56 cr
- Highest ever annual revenue of 1000+ cr
- Business mix: Pvt sales 73% , Govt sales 18% and exports 9%
- Product mix –
- HV cables –57%
- LV cables – 36%
- Conductor 7%
- Order book 726 cr
- 70% is from power utilities.
- 15% is from solar / renewables
- 8 to 10% is from Govt discoms
- Strong demand scenario – order book has grown QoQ, was at 670 cr in Q3 FY 25
- Improvement in working capital cycle
- Govt business is down from 23% to 17% this FY. – resulting in better working capital cycle.
- Have also been moving to large corporate clients gradually over last 3-4 years, thereby working capital cycle likely to improve gradually
- FY 25 ROCE and ROE was 26% and 22% respectively
- Debt levels down from 119 cr to 59 cr – mainly short-term debt
- US market: Received one product approval. Two more product approvals in pipeline: likely to receive in this FY. Waiting for more clarity on tariffs, before pursuing more aggressively.
Capex & Revenue Potential
- Capacity expansion (35 to 40 cr) which was announced earlier likely to be operational by start of H2 FY 26. Asset turns of about 5 to 6. Will look for optimum utilization at the earliest
- Looking to diversify portfolio in HV and speciality cables segment
- Have vacant land parcel (15,000 sq m) near to existing plant – which can be utilized for additional capex if needed.
- Policy has been to grow through set of incremental capex rather than doing 1 big capex
New Products
- Started with solar cables in existing plant.
- Launched Speciality conductor (Electronic Beam technology) in the market
Business outlook
- Maximum revenue potential considering new capacity - 1400 to 1450 cr
- Margin trajectory has remained consistent at 10 to 10.5% over last 4-5 years. Will look to sustain this going forward.
- Export demand –
o Pitching to markets like USA, Australia – mainly power and renewables segments. Lot of spends happening in power infrastructure.
o Replacement of their old grid – likely to result in huge demand coming up in next few years.
o Sizable contribution to revenue in FY 27
- Do not see signs of any degrowth or demand slowdown for cables sector for next 5 years – strong demand in renewables, power, etc
Disc: Invested with a tracking position
5 Likes
