As the Indian government continues to invest extensively in infrastructure projects through initiatives such as the ‘Smart Cities Mission’ and ‘Bharatmala,’ the demand for high-quality electrical cables and wires has risen over the past years.
The Indian wire and cable industry, which was worth $680-730 billion in FY23, is predicted to grow by more than 10% each year in the medium future. Demand is likely to be driven by factors such as increased renewable energy generation, infrastructure development and renovation, increased investments in metro trains, manufacturing capacity augmentation backed by the Production-Linked Incentive (PLI) plan, and so on.
Growing energy demand in India, driven by continuous economic expansion and urbanization, has also boosted the renewable energy development industry.
As a result, the necessity for transmission and distribution sector upgrading has been emphasized to decrease transmission losses. The government’s emphasis on universal power, rural electrification, and infrastructure improvement has raised demand for cables and wires.
Here are three cable stocks with a capex of up to Rs 600 crore for FY24.
KEI Industries Ltd :
KEI Industries showed an annualized growth in the past five to six years has been 17–18%. (Except in 2021). The company’s has a export margin of around 11 percent. The company has free cash of Rs. 500- 550 crore as of the recent fiscal year.
KEI is on a capacity expansion spree to meet the increasing demand for all types of cables LT, HT, and EHV. The company plans to spend around Rs.1,000 crore in the next three years.
In FY2024, the company is likely to incur a total capex of Rs. 400 crore for greenfield and brownfield capacity expansion.
The company planned to double EHV cable capacity, to boost its EHV revenue to Rs. 1,200 crore. Moreover, the Management expects company’s the brownfield capex of Rs. 50 crore in its Silvassa plant for LT power cables would generate an additional revenue of around Rs. 500 crore by H2FY24.
The KEI’s revenue breakup is based on portfolio such as 17.4 percent in high tension cables, Low tension cables 41 percent, Housing wires 26.8 percent, and Stainless Steel 3.6 percent.
The company is present in Australia, the Middle East, and some of the African countries. The company expects export sales to be at 10-12 percent in FY2024 (as compared to 10 percent in FY2023).
The earnings of the KEI are divided into several portfolios, including 17.4 percent in high-tension cables, 41 percent in low-tension cables, 26.8 percent in housing wires, and 3.6 percent in stainless steel.
On Thursday, Company shares were trading at Rs 2,902.40 per share, down 2.60 percent from the previous close price. The company has a market capitalization of Rs 26,188 crore.
Finolex Cables Ltd :
Finolex Cable is India’s leading manufacturer of electrical and telecommunication cables with a 22 percent market share in the organized wire industry.
The company’s capex guidance for the next 18 to 20 months is expected to be around Rs 300 crore and another Rs 100 crore on replenishment programs for existing capacities.
The company’s topline is anticipated to increase by around Rs 2,000 crore, to Rs 6,000–6,500 crore, as a result of the investment in capacity growth. Since Finolex has no debt, its $2,200 crore in cash reserves will support expansion.
The business has boosted its fiber optic cabling capacity from 8 million to 10 million km. Electrical cables account for 82% of the company’s income, while communication cables account for 13%.
Finolex has undertaken significant capital expenditure plans. These include
expanding its manufacturing capabilities, enhancing production capacities, and adopting the latest technologies to improve efficiency and output.
Finolex has initiated action to enter the engineering, procurement, and construction (EPC) industry of laying fiber optic cables in the telecom sector.
On Thursday, Company shares were trading at Rs 1,056.70 per share, down 1.17 percent from the previous close price. The company has a market capitalization of Rs 16,146 crore.
Havells India Ltd :
Havells India is India’s leading manufacturer of a wide range of industrial and consumer electrical goods. Last year, the company commissioned a new air conditioner plant in Sri City, Andhra Pradesh, and this year company is expanding its washing machine and cable capacities.
Havells has planned an investment of about Rs. 600 crore in the 2023-24 financial year, for the development of a cable manufacturing unit in Bengaluru and a washing machine manufacturing unit.
The company is developing a new cable manufacturing plant at Tumkur which will be commissioned by end-FY24. Havells currently supplies to more than 70 countries across various product categories, including air conditioners, cables, fans, and switchgear.
Havells is diversified in different business segments in which the cables business accounts for 33 percent of overall revenue, while switchgear accounts for 20 percent, and electrical consumer durables account for 19.5 percent of revenue.
Havells liquidity continued to be strong, marked by expected strong accruals of more than Rs 1,500 crore during FY24 against nil debt repayment obligations. Besides accruals, the company had cash and cash equivalents to the tune of Rs 1,974.85 crore as of March 31, 2023.
On Thursday, Company shares were trading at Rs 1,326.10 per share, down 0.71 percent from the previous close price. The company has a market capitalization of Rs 83,286 crore.
Written by Omkar Chitnis
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