Release Date: October 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KEI Industries Ltd (BOM:517569, Financial) reported a 17.21% increase in net sales for Q2 FY25, reaching INR2,279.64 crores compared to INR1,945 crores in the previous year.
- The company achieved a 10.42% growth in profit after tax (PAT) for the quarter, amounting to INR154.87 crores.
- Domestic institutional cable sales grew by 20% to INR615 crores, indicating strong demand in the domestic market.
- Sales through the dealer network increased by 36% in Q2, contributing 55% to total sales, up from 47% in the previous year.
- The company plans significant capital expenditure, with INR900 crores to INR1,000 crores allocated for greenfield expansion at Sanand, which is expected to support future growth.
Negative Points
- EBITDA margin decreased slightly to 10.42% from 10.88% in the same period last year, indicating pressure on profitability.
- Export sales declined to INR241 crores from INR249 crores in the previous year, reflecting challenges in international markets.
- The contribution of total institutional cable sales decreased to 39% from 44% in the previous year, suggesting a shift in sales mix.
- EPC sales, excluding cables, dropped to INR80 crores from INR113 crores last year, highlighting volatility in this segment.
- The company's finance cost increased significantly to INR27.49 crores from INR16.47 crores in the previous year, impacting net profitability.
Q & A Highlights
Q: Can you explain the rationale behind the QIP fundraise and any changes in the CapEx plan?
A: Rajeev Gupta, CFO, explained that the fundraise is to support the Sanand project, which requires INR1,800-1,900 crores. The company aims to avoid additional borrowing by raising funds from the market, ensuring sufficient working capital for future needs.
Q: Why were institutional sales and exports weaker this quarter, while dealer sales drove growth?
A: Rajeev Gupta, CFO, noted that the focus is on capacity utilization. Retail sales increased, leading to a 17% sales improvement. The fluctuation in raw material prices impacted EBITDA margins, but overall growth remains strong.
Q: What is the outlook for the EPC business, given its volatility?
A: Rajeev Gupta, CFO, stated that the EPC business is being reduced and will not exceed 5-6% of sales. The volatility is due to site conditions and permissions, but the company is maintaining minimal EPC activity to manage existing projects.
Q: How does the company plan to maintain a debt-free status while continuing CapEx cycles?
A: Rajeev Gupta, CFO, emphasized the goal of remaining debt-free. The current fundraise is planned to cover CapEx needs, ensuring cash accruals are available for working capital, supporting a 17% growth rate without additional debt.
Q: What are the major sectors driving demand, and how does the company plan to focus on them?
A: Anil Gupta, Chairman and MD, highlighted strong demand from the solar, wind, transmission, and data center sectors. The company focuses on all sectors with demand, leveraging its channel partners and sales teams to capture opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
