Summary:
RR Kabel’s CFO, Rajesh Jain, anticipates a 15% volume growth in the second half of the fiscal year 2025 (H2 FY25). This projection comes despite the company reporting a 33.16% decline in net consolidated profit for Q2 FY25, which ended on September 30, 2024. The company attributes this dip to increased expenses and pricing pressures. However, RR Kabel achieved its highest-ever quarterly and half-yearly revenues in Q2 FY25, driven by strong double-digit volume growth in the domestic Wires & Cables business and solid revenue performance in the Fast Moving Electrical Goods (FMEG) segment. The company remains optimistic about margin improvements in H2 FY25, supported by ongoing capital expenditure plans and anticipated completion of these projects by the fiscal year-end.
Key Insights:
Growth Drivers: The growth in the Wires & Cables segment is likely driven by factors such as infrastructure development, housing construction, and increasing demand from emerging sectors.
Positive Outlook Amidst Challenges: Despite the recent dip in profitability, RR Kabel’s management maintains a positive outlook for the remainder of the fiscal year. The projected 15% volume growth suggests continued strong demand for the company’s products, particularly in the Wires & Cables segment.
Focus on Volume Growth: The emphasis on volume growth indicates RR Kabel’s strategy to capture market share and solidify its position in the industry, even if it means facing short-term pressure on margins.
Capital Expenditure and Margin Improvement: The company’s ongoing investments in capacity expansion and efficiency improvements are expected to contribute to margin recovery in the second half of the fiscal year.
Investment Implications:
Industry Analysis: Investors should also consider the overall industry dynamics, including competition, raw material prices (copper), and regulatory changes, to gain a comprehensive understanding of the investment landscape.
Potential for Long-Term Growth: RR Kabel’s focus on volume growth and capacity expansion suggests a positive long-term outlook for the company. Investors with a long-term horizon might consider the current dip in profitability as a potential buying opportunity.
Monitor Margin Trends: While the company expects margin improvement in H2 FY25, investors should closely monitor the company’s financial performance in the coming quarters to assess the effectiveness of its strategies to address margin pressures.
Sources:
Economic Times: RR Kabel’s net profit declines 33.16% in Q2 FY25
