KEI Industries Ltd Q2 2022 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rahul Agarwal - InCred Capital - Analyst : Hi, sir. Good afternoon, and congratulations for a very good set of numbers given the circumstances. I had three quick questions. Firstly, on the housing wire, the sale was INR400 crores. I think that beats your own guidance as well as our estimates as well. First question on that, is this a normal quarterly run rate going forward or this had some element of pent-up demand for 1Q? And obviously, second half generally is better than first half for cable and wire company. So what kind of run rate are we looking for housing wire? That's my first question.

Question: Rahul Agarwal - InCred Capital - Analyst : So for full year, what kind of numbers we should look like for housing wire?

Question: Rahul Agarwal - InCred Capital - Analyst : Got it, sir. Secondly, on the gross margins, obviously, they were down, but you maintained EBITDA margins quite decently. Given Havells and Polycap both reported suboptimal cable and wire margins, what was your strategy in the second quarter? Because what we understood was copper was easier to pass through because that's a very established metal, but other metals like steel, aluminum as well as PVC was very tough. So what really happened in terms of price hikes and how did you manage that?

Question: Rahul Agarwal - InCred Capital - Analyst : Okay. Got it. And lastly, on the CapEx, so first half looks like you just spent INR22 crores. My sense was this was the first year to basically start our large CapEx. If you could just guide, please, for the current year and next year CapEx. I think some delay of this year will be caught up in next year. So any sense on that? Thank you.

Question: Rahul Agarwal - InCred Capital - Analyst : So for this year, it looks like the CapEx is going to be below INR100 crores, and next year, it will be higher than --

Question: Rahul Agarwal - InCred Capital - Analyst : Right. And next year, we should assume INR200 crore, INR250 core? Or how is it?

Question: Rahul Agarwal - InCred Capital - Analyst : Okay, sir. I'll come in the queue. Thank you so much. All the best.

Question: Naval Seth - Emkay Global - Analyst : Yeah. Thank you for the opportunity, sir. I'm Naval Seth from Emkay. Few questions on revenue, like EHV segment, if I look at on a first-half basis because last quarter --

Question: Naval Seth - Emkay Global - Analyst : Yeah. Now it is better?

Question: Naval Seth - Emkay Global - Analyst : Okay. So my question, sir, first question is on EHV segment on first-half basis, if I look at, the number on an average is lower than pre-COVID number of last year also. So what kind of growth you are expecting in H2 in EHV? Second, on stainless steel, you are already at 100% capacity utilization and strong numbers in H1. So is this run rate sustainable or there were some one-off orders in first half, which led to this kind of run rate?

Question: Naval Seth - Emkay Global - Analyst : Sure. And thirdly, on volume growth, if you can bifurcate in house wires or LT cable. So how has been the trend because LT cable, I believe, the volumes are still under pressure? So by when we are expecting things to normalize? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2021 / 6:30AM, KEIN.NS - Q2 2022 KEI Industries Ltd Earnings Call

Question: Naval Seth - Emkay Global - Analyst : Understood. And sir, last question on retention money, any update you want to share? What you have stated that INR150 crores will be covered this year, so anything on that incrementally?

Question: Naval Seth - Emkay Global - Analyst : Understood. Thank you so much, and wish you all the best. I'll come back in the queue.

Question: Lavina Quadros - Jefferies - Analyst : Yeah. Thanks, sir, for the opportunity, and congrats on a good set of number. Two questions. One is, again, the standard, what is the interest rate breakup across, I mean, different heads for the quarter?

Question: Lavina Quadros - Jefferies - Analyst : Great. And sir, just to understand your working capital, when I look at it, your current liabilities has come down. That's because you are choosing to pay cash, right, and reduce interest. So I am just trying to understand that.

Question: Lavina Quadros - Jefferies - Analyst : So that's the only reason. There is nothing else there, right?

Question: Lavina Quadros - Jefferies - Analyst : Okay. So you're setting that up. And sir, just to understand (multiple speakers) --

Question: Lavina Quadros - Jefferies - Analyst : Yes, sir. That's the reason I ask. So basically, that is the reason. Got it. And sir, the other thing is, I know on retail you all have mentioned that 50%, 60% is the outlook for the full year. But just wanted to clarify again, there's nothing one-off in this quarter on the revenue line, right? So therefore, this run rate should continue to improve, like you are saying.

Question: Lavina Quadros - Jefferies - Analyst : And it's been -- you think it's the market size growing, or it's you all gaining share, if you are to put your finger on it?

Question: Lavina Quadros - Jefferies - Analyst : All right. And sir, last question on your EPC side of the business, you have still had reasonable numbers in this quarter. So on a full year, it will possibly the INR7 billion to INR8 billion, you think it ends this year?

Question: Lavina Quadros - Jefferies - Analyst : Got it. Thank you.

Question: Lavina Quadros - Jefferies - Analyst : Understood. Thank you so much. Okay.

Question: Charanjit Singh - DSP Mutual Fund - Analyst : Yeah. Hello, sir. Am I audible?

Question: Charanjit Singh - DSP Mutual Fund - Analyst : Sir, first of all, congratulations on good set of numbers given the environment. So my first question is in terms of the competitive intensity from smaller players, how you are seeing that in this quarter, unorganized versus organized? And in terms of our market share, will you able to share some numbers? That's the first question.

Question: Charanjit Singh - DSP Mutual Fund - Analyst : Okay. Yeah. So I know that. So this is you are talking only about the housing wire or both housing wire and cables put together?

Question: Charanjit Singh - DSP Mutual Fund - Analyst : Okay, sir. And sir, from the current capacity utilization perspective, can you tell us what are the capacity utilizations right now across the different plants and within the --

Question: Charanjit Singh - DSP Mutual Fund - Analyst : Okay, sir. And so now, Anil-ji, also talked about that the overall outlook is extremely positive. And we could see maybe a longer cycle in terms of how the infrastructure overall things are picking up. Would you be able to give us more from a KEI's perspective how KEI looks itself in terms of, one is the topline, and how our margin profile can change over the years as we scale up the top? Additionally, the retail thing in terms of house wires where we are trying to scale up in a big way, how that contribution will be in the next three years' timeframe? Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2021 / 6:30AM, KEIN.NS - Q2 2022 KEI Industries Ltd Earnings Call

Question: Charanjit Singh - DSP Mutual Fund - Analyst : Okay, sir. And sir, on the retail side of the business, the housing wire, if you can just give us update in terms of the addition of manpower or the distributors that we have added in this quarter. And for the second half, what is our brand structure on the housing wire segment? That's my last question.

Question: Charanjit Singh - DSP Mutual Fund - Analyst : Okay. (inaudible) Thanks again for taking my questions.

Question: Ankit Kumar - Alpha Capital - Analyst : Hello, sir. Congrats on the very good set of numbers. Sir, my first question would be we have done really well on managing the cost in terms of margins this quarter compared to our peers. So any guidance on how second half is going to be because the copper prices are still quite volatile?

Question: Ankit Kumar - Alpha Capital - Analyst : Okay. Sir, next question would be there has been decent level of promoter selling in the last three months. Any reason for that? And what can we expect in terms of?

Question: Ankit Kumar - Alpha Capital - Analyst : And so sir, no more plans to selling?

Question: Ankit Kumar - Alpha Capital - Analyst : Sure. Got it. And sir, on Dangote, there was nothing done in the last half of last year. So am I right on that? Second half, there was nothing on Dangote.

Question: Ankit Kumar - Alpha Capital - Analyst : Okay, sir. And sir, overall guidance for second half would be, I think we have done 30% for the first half, and we were used to guiding 18%, 20% long term. So second half would be equally strong in terms of 30%-odd or how should we look at it? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2021 / 6:30AM, KEIN.NS - Q2 2022 KEI Industries Ltd Earnings Call

Question: Ankit Kumar - Alpha Capital - Analyst : Sure, sir. Thank you, and all the best.

Question: Samir Patel - AUM Finance - Analyst : Sir, can you just highlight on the working capital cycle as in because our inventory has increased by INR150 crores. That, I can understand with the increased sales, but our payables have also reduced by around INR150 crores. So what is currently happening?

Question: Samir Patel - AUM Finance - Analyst : Yes. So what is your target on number of days for the quarter cycle?

Question: Samir Patel - AUM Finance - Analyst : Okay. And on the payable end?

Question: Samir Patel - AUM Finance - Analyst : Okay. So should we -- so that means that our working capital cycle will increase to almost four months by the year-end, that is you --

Question: Samir Patel - AUM Finance - Analyst : Okay. And sir, currently, the term loan that we have, what is the interest percentage on that?

Question: Samir Patel - AUM Finance - Analyst : Got it, sir. Okay. Thank you.

Question: Rahul Agarwal - InCred Capital - Analyst : Yeah. Thanks for the follow up. Sir, just couple of questions. One is debtor balance. As you highlighted, it's a bit higher. Is it related to that extra EHV order dispatch or is there something else?

Question: Rahul Agarwal - InCred Capital - Analyst : Sir, I understand. I was referring to the absolute number INR1,380 crore --

Question: Rahul Agarwal - InCred Capital - Analyst : Okay. Got it. And lastly, you said your current capacity is enough to cover fiscal '23 growth. Is that correct?

Question: Rahul Agarwal - InCred Capital - Analyst : Okay. Got it, sir. Thank you so much. Best wishes for Diwali.

Question: Rajiv Mehra - Sanctum Wealth - Analyst : Yeah. Hello, sir. Congrats on the good set of numbers. Sir, obviously, you spoke and touch upon the margins. I just wanted to understand the sustainability of margins going ahead should be in the range of 10.5% to 11%, as you mentioned. Is that correct?

Question: Rajiv Mehra - Sanctum Wealth - Analyst : Okay. And sir, if you could just touch upon your export business. Going ahead, what kind of traction are we seeing there? And what could be the contribution going ahead in the next, say, in the next financial year or maybe in the next coming couple of years? And also, in your opening remarks, you touched upon the launching of a couple of products on the FMEG side, if you could just touch upon your CapEx plan or how much spending have you done on that segment? And what could be the contribution going ahead in the next couple of years from this side?

Question: Rajiv Mehra - Sanctum Wealth - Analyst : Fair enough, sir. Thank you very much, and happy Diwali.

Question: Manoj Gori - Equirus Securities - Analyst : Yeah. Thanks for the opportunity, sir. Sir, you already mentioned about the support to dealers that you have been offering. Can you elaborate more, like what is the exact role that you are providing to your dealers other than engagement with the influencer? So what are the other kind of support that you are offering?

Question: Manoj Gori - Equirus Securities - Analyst : Right. Understood. Sir, secondly, so you have been guiding, and you have always outperformed your guidance, and you have been guiding for the sustainable growth. But currently, obviously, there seems to be some pressure on volumes from the cable side, whereas post-COVID, if you look at demand for volumes have definitely picked up. And those has been pretty robust for the industry as a whole. How do you look at the cable demand in this regard to volume in the coming times? And what do you think would be the key figures over there?

Question: Manoj Gori - Equirus Securities - Analyst : Right. No, I do understand that. But with regards to volumes, obviously, even when the last year, we were expecting some demand to pick up. So not KEI in specific, but the industry as a whole from fourth quarter. So I was just trying to understand on that.

Question: Manoj Gori - Equirus Securities - Analyst : Yeah. Right. Sir, you did mention on the gross margin pressure that, obviously because of the other volatility, there was some sequential impact on gross margin. So would you attribute the total impact on sequential basis, purely on the basis of volatility or there has been some channel hesitancy as well with regards to price hike?

Question: Manoj Gori - Equirus Securities - Analyst : Right. Understood. Thanks a lot, sir, and wish you all the best for the coming quarters.

Question: Shrinidhi Karlekar - HSBC - Analyst : Yeah. Hi. Thank you for the opportunity, and congratulations on good set of number. So my first question is on this government's recent scheme on power distribution sector where they plan to spend about INR3 lakh crore. A lot of it goes in cables and high-voltage distribution infrastructure. So just wanted to know your perspective. Does that really improve the volume growth or outlook for the power cable segment, and does it improve the visibility as well or just the packaging of the existing demand that anyways come?

Question: Shrinidhi Karlekar - HSBC - Analyst : Okay. Yeah. But sir, this time, it sounded like it is very project specific, and they want to spend it only on two areas. One is like, of course, it is smart metering, and another is they typically talk about cabling. So I was just wondering, is it different? Or it's like UDAY 1.0 where balance sheet is getting improved?

Question: Shrinidhi Karlekar - HSBC - Analyst : Exactly. Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2021 / 6:30AM, KEIN.NS - Q2 2022 KEI Industries Ltd Earnings Call

Question: Shrinidhi Karlekar - HSBC - Analyst : Fair enough, sir. And sir, I just wanted to know how large is the solar cable business for KEI? And how large is this overall solar cable industry in India? And sir, related second question is, in the past, you have highlighted that how solar -- utility solar power plant increases demand for cable business because the evacuation of power happens through cables as against overhead transmission. So I just wanted to know in what -- how much percentage of the case is actually to the evacuation of power happens through cables, and how much happens through overhead transmission?

Question: Shrinidhi Karlekar - HSBC - Analyst : And sir, how large would it be for KEI already this business in terms of percentage?

Question: Shrinidhi Karlekar - HSBC - Analyst : Okay. Right. Fair enough. And sir, like in the past, sir, company did collaborate with a Swiss company to get the capabilities on EHV side. I was just wondering, are some schemes or such partnerships are in the works to build capabilities on the offshore wind power evacuation cables? Because there, I think you need submersible cables, so just wondering. I know it's not an immediate demand in market, but come few years out, you would have demand for these. So just wondering, are plans there to develop these cables?

Question: Shrinidhi Karlekar - HSBC - Analyst : Right, sir. And just last one, sir, if I may. So just wanted to understand this EHV cable. Is it fair to understand that the entire EHV cable direct sales as well as through EPC, it goes to the distribution utilities, right? Eventual customer is distribution utilities, right? In most of --

Question: Shrinidhi Karlekar - HSBC - Analyst : Right. Yeah. Fair enough. Thank you, sir, for answering my questions, and all the very best.

Question: Amit Mahawar - Edelweiss Securities - Analyst : Hello, Anil-ji and Rajeev-ji. Congratulations on a great retail run and consistency. So I only have one question. Typically, it seems the dealer network and ground presence has more eastern focus. You can correct me if I'm wrong, or can you give some details of which regions have driven the super growth of more than 50% in first half in house wire retail? Thank you.

Question: Amit Mahawar - Edelweiss Securities - Analyst : Okay. That's helpful, sir. Thank you, and good luck for the future growth.