KEI Industries Ltd Q4 2023 Earnings Call Transcript

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

Question: Rahul Agarwal - InCred Capital - Analyst : Hi, good afternoon. Thank you for the opportunity. Congratulations for achieving the guidance for the year. Sir, just two questions to start with. Firstly, for the current fiscal, fiscal '24, what are the three, four things we are working on to achieve your top-line target? As you're saying, obviously, CapEx is a much more focused area. Could you highlight another three, four things we're working on to achieve your 16%, 17% growth on top line and [11%] margins that you guided earlier for fiscal '24? That's the first question.

Question: Rahul Agarwal - InCred Capital - Analyst : Got it, sir. Sir, second question was for Anil-ji. Sir, there has been -- starting June '21, where almost 3 million shares have been sold -- reported on the stock exchange -- about INR270 crores, a 3% of equity. There have been some concern when we interact with your shareholders and other investors regarding this. Whatever clarity, if you could help us to understand and if you don't mind sharing the purpose for this, is it now done with or should we expect something more?

Question: Rahul Agarwal - InCred Capital - Analyst : Got it, sir. Appreciate that reply, sir. Thank you so much. And lastly, on the Gujarat plant set-up is saying the construction will pick up speed up now. We should expect the first output from there sometime in September, December of next year. Is that correct?

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

Question: Alok Deshpande - Nuvama Wealth Management Limited - Analyst : Good afternoon, everyone. Congratulations to the entire KEI team for a great performance. Sir, two questions from my side. One, if you could give us some sense on the volume growth for Q4 in cable and wire and also for the entire year. So that's my first question.

Question: Alok Deshpande - Nuvama Wealth Management Limited - Analyst : Okay. And this is only for cables or cables and wires. I mean the house wire put --?

Question: Alok Deshpande - Nuvama Wealth Management Limited - Analyst : So 13% for Q4 and 20% for the entire year, right?

Question: Alok Deshpande - Nuvama Wealth Management Limited - Analyst : And sir my second question was, when we look at your raw material cost or your gross margin, sir, when you look at spot prices of, let's say, aluminum or copper, does this affect you with a lag in the sense that the prices which were there for Q3 of FY23, would that would have had an impact on how your margins were in Q4? Or how should we -- is it like immediate basis?

Question: Alok Deshpande - Nuvama Wealth Management Limited - Analyst : Okay. Okay. So on a blended basis, is it fair to assume 20, 25 days is the lag effect, right?

Question: Alok Deshpande - Nuvama Wealth Management Limited - Analyst : Okay. Okay. And sir, if I may just ask this one question, last one question. Now as you mentioned at the start that INR250 crores to INR300 crores annual CapEx for the next two, three years, given where the prices are currently I'm sure compared to last year's prices, the prices currently would be lower given that aluminum and copper prices are now lower -- on this additional CapEx for the next two or three years, what sort of asset turn can we expect in terms of revenue addition on the current base?

Question: Alok Deshpande - Nuvama Wealth Management Limited - Analyst : Okay. So 1:6 is at the highest potential -- you mean at the highest utilization ?

Question: Alok Deshpande - Nuvama Wealth Management Limited - Analyst : Sure sir. Understood. Thank you very much, sir. I'll get back in queue and all the very best.

Question: Riya Mehta - Aequitas Investment Consultancy Pvt Ltd - Analyst : Hello, sir. Thank you for giving me the opportunity. My first question is in regards to the EHV cable. What kind of demand are we seeing in the -- how is the export market for the same?

Question: Riya Mehta - Aequitas Investment Consultancy Pvt Ltd - Analyst : Okay. And where is the demand? So will it be domestic or it's international also -- on the same?

Question: Riya Mehta - Aequitas Investment Consultancy Pvt Ltd - Analyst : Okay. And in terms of housing wire, what kind of inventory is there at the distributor levels and how do we see the entire scenario?

Question: Riya Mehta - Aequitas Investment Consultancy Pvt Ltd - Analyst : Okay. And in terms of raw material, so basically, what kind of decrease in cost have we seen on a Q-o-Q basis? And going forward, what would be your guidance?

Question: Riya Mehta - Aequitas Investment Consultancy Pvt Ltd - Analyst : Okay. Thank you. That's it from my end.

Question: Pranav Gupta - ASK Investment Managers Ltd. - Analyst : Thank you for the opportunity. Just one question regarding the volume growth that you pointed out that 13%, considering the copper prices, would have declined by around 1%, 1.5% on a year-over-year basis. (multiple speakers) some clarity --

Question: Pranav Gupta - ASK Investment Managers Ltd. - Analyst : So if you could just give a breakup of what the volume and price -- volume is at 13% and price, what kind of a decline you would have seen year on year?

Question: Pranav Gupta - ASK Investment Managers Ltd. - Analyst :

Question: Pranav Gupta - ASK Investment Managers Ltd. - Analyst : Okay. Great. Thanks.

Question: Abhineet Anand - Emkay Global Financial Services Ltd. - Analyst : Thanks for the opportunity. Sir, just want to understand, over the last five, six years, we have had a very decent growth of anywhere between 15%, 18%. But on the margin side, it has ranged at 10.5% plus, minus [certain] basis points. So when does the operating leverage actually kick in to 11% to 11.5%? Can you guide on that?

Question: Abhineet Anand - Emkay Global Financial Services Ltd. - Analyst : So currently we are at 7.5%. You are saying that -- on an absolute basis, you are saying this or for the (multiple speakers)? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call

Question: Abhineet Anand - Emkay Global Financial Services Ltd. - Analyst : Sir, basically, saying this 1.5% increase -- so this -- this is for the incremental suppliers you are saying from Gujarat or the whole you are --?

Question: Abhineet Anand - Emkay Global Financial Services Ltd. - Analyst : Okay. So in next five years, fair to assume this 10.5%,11% can go to 12%, 12.5%?

Question: Abhineet Anand - Emkay Global Financial Services Ltd. - Analyst : But it is fair to assume that with the new large plant coming up -- and I assume sir told that around INR250 crore to INR300 crore for the next year -- so is this like INR800 crore to INR1,000 crore investment, right? Over the next three years?

Question: Abhineet Anand - Emkay Global Financial Services Ltd. - Analyst : Okay. And just on the current capacity wise, while you did mention, in terms of the utilization, cable is at 91%, even if we were to -- the Silvassa plant INR45 crore, I suppose the benefits will probably come in H2 of this year, right? Not in H1. So from --

Question: Abhineet Anand - Emkay Global Financial Services Ltd. - Analyst : Okay. So the one that you have done was INR98 crores and the second will be of INR45 crores. Fair to understand that?

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : Yeah, hi. Thank you for the opportunity and congratulations on good set of numbers. Sir, just one clarification on CapEx. We are guiding for INR250 crore to INR300 crore this year. Does that include INR45 crore brownfield CapEx at Silvassa?

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : Probably then INR300 crore to INR350 crore FY24 CapEx, right?

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : Okay. And second, sir, I think we gave overall volume growth for the cable and wire business. Is it possible to break that into a wires business? Like how much is it for housing wire for quarter and the full year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : That is for Q4 we said, right?

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : And for full year, sir?

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : 31%. And last, sir, we had a very good improvement in the working capital in last couple of years. Do you see there is scope to improve working capital intensity further on both inventory as well as receivable days?

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : Okay. Right. Inventory, sir, particularly has come down a lot. Wondering can these level sustainable?

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : Okay. And last, sir, may I ask your order backlog breakup? I couldn't note it down. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call

Question: Shrinidhi Karlekar - HSBC Securites & Capital Markets (India) Private Ltd. - Analyst : Okay. Thank you very much, sir.

Question: Keyur Pandya - ICICI Prudential Life Insurance Company Ltd. - Analyst : Thank you. Two questions. First is on the EHV cable, we have seen de-growth for FY23. And now I think you are guiding for much higher number for FY24. So what transpired in FY23 and why it will come back in '24? That is first question. And second question, when you talk about 16%, 17% overall revenue growth, what segments will grow above, say, company average and what will drag the overall revenue growth? Just a breakup of this. Thank you.

Question: Keyur Pandya - ICICI Prudential Life Insurance Company Ltd. - Analyst : Okay, sir. Just one follow up on this. When you say 91% capacity utilization in cables overall -- and while B2B segment is growing but B2C real estate has seen some kind of slowdown -- an overall slowdown. Plus, we have reached a certain scale. So in that context, how practical is it to grow, say, retail/wires -- house wire segment above company level average?

Question: Keyur Pandya - ICICI Prudential Life Insurance Company Ltd. - Analyst : Sure. Noted. Thanks a lot and all the best.

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Yeah, thank you, sir. So my question is how much of the revenue for a full year for the EHV/EPC revenue?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Regarding clarification on the EHV order book, how much is that? That's INR350 crore or INR850 crore?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay. And lastly, sir, you had earlier guided for the housing wire growth of 17% to 18% for '24. So is it largely --?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Overall -- in a earlier call, actually you had given some housing wire number for 17%,18%. So you are revising to lower numbers or that is largely on the volume side only you are guiding for or there is -- ? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay. And that's largely on a volume growth.

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay. Thank you.

Question: Devansh Nigotia - SIMPL - Analyst : Yeah. Sir, thanks for the opportunity. Sir, can you elaborate a bit more on the export opportunities that you mentioned, especially the emphasize on US? And what are the sectors which are gaining significant traction in exports?

Question: Devansh Nigotia - SIMPL - Analyst : Sir, I asked the question because a lot of -- export in cables have been significant traction in last three to six months. So is it like -- for us it is only the company own acceptances that we have received or overall for India, there have been some significant change in the preference towards the Indian supplier in exports of cable? Has anything of that played out? Any perspective, if you can share, over here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call

Question: Devansh Nigotia - SIMPL - Analyst : And which sector are gaining traction in export cables? There is no significant sectors?

Question: Devansh Nigotia - SIMPL - Analyst : Power and solar cable. Okay. And in case of EHV cable, we mentioned order backlog INR850 crore, but our execution was low. So can you elaborate a bit more on demand environment here? This is mainly domestic demand or it also includes export?

Question: Ravi Purohit - Securities Investment Mgmt. Pvt. Ltd. - Analyst : Yeah, hi. Thanks for the opportunity and congratulations on good set of numbers. Most of my questions have been answered. Just wanted to kind of briefly understand between 2019 and now, what point -- what would have been like our overall aggregate volume growth versus price growth, because prices are like still 40%, 50% higher in terms of underlying commodity like copper and all? So if you have like a three-year or a four-year view between volume and value. How much would the two account for?

Question: Ravi Purohit - Securities Investment Mgmt. Pvt. Ltd. - Analyst : Because see, if I look at '19, our overall revenue numbers for a little over INR4,000 crores. We are right now a little less than INR7,000 crores. That's about 65% jump over a four-year period. Commodity prices are also like 40% higher, 45% higher. So what was, let's say, per kilo price of copper or REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call aluminum four years back, it is probably like 40% higher even today. So in that sense, would you say that volume growth would have been slower -- I mean much lower over four-year period average?

Question: Ravi Purohit - Securities Investment Mgmt. Pvt. Ltd. - Analyst : Okay. Thank you and all the best, sir.

Question: Achal Lohade - JM Financial Institutional Securities Pvt. Ltd. - Analyst : Yeah, good afternoon, sir. Thank you for the opportunity. Just have two questions. One is a clarification on the recent comments you just made with respect to the value growth. Now if I were to ask you, sir, if the copper price were to be down, say 20%, in FY24 , but when you're talking about focusing on value growth, does that mean that the volume growth you will try to a grow by 25% to 30%. How do we understand the pricing part of it?

Question: Achal Lohade - JM Financial Institutional Securities Pvt. Ltd. - Analyst : Right.

Question: Achal Lohade - JM Financial Institutional Securities Pvt. Ltd. - Analyst : Got it. But sir, in terms of the pricing, when you are --? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call

Question: Achal Lohade - JM Financial Institutional Securities Pvt. Ltd. - Analyst : Understood. Sir, just a clarification on the pricing, you work on your prices or the margin on a rupees per meter or rupees per unit or --?

Question: Achal Lohade - JM Financial Institutional Securities Pvt. Ltd. - Analyst : Even for the industry as well. Understood. And just one clarification on the export, sir. Which are the top-five countries and what's their contribution and how much of our total exports is under own brand?

Question: Achal Lohade - JM Financial Institutional Securities Pvt. Ltd. - Analyst : And its contribution? The total contribution of these countries in the total exports? Would that be 60%, 70%?

Question: Achal Lohade - JM Financial Institutional Securities Pvt. Ltd. - Analyst : Thank you for the clarification, sir. Wish you all the best.

Question: Shubham Aggarwal - Axis Capital - Analyst : Hi, sir. Thanks for the opportunity. Sir, I was just listening to the call. And a rough calculation shows that the incremental sales from greenfield CapEx, that you will need to generate a 13.5% EBITDA margin for the overall company -- sorry, margins -- we need to lift the margins for the company by 1%, right? At overall level? So we need a 13.5% EBITDA margin on the incremental revenue that we get from the greenfield CapEx. I just wanted to understand what can help us generate this 13.5% EBITDA on the incremental sales from the greenfield. The products are going to be the same, right? Which are already generating 11% margin at the most.

Question: Shubham Aggarwal - Axis Capital - Analyst : Okay, sir. Secondly, can you give me the volume of copper and aluminum consumed in FY23 by the company?

Question: Shubham Aggarwal - Axis Capital - Analyst : Okay. This includes copper and aluminum total, right?

Question: Shubham Aggarwal - Axis Capital - Analyst : Thank you.

Question: Hardik Rawat - IIFL Securities Limited - Analyst : Hello?

Question: Hardik Rawat - IIFL Securities Limited - Analyst : Yeah. Can you hear me?

Question: Hardik Rawat - IIFL Securities Limited - Analyst : Good afternoon. So my question was with regards to the metal consumption that you just stated that -- you stated that roughly you consume about 81,800 metric tons of metal, and I presume that aluminum and copper are the main metals that you source. So I just wanted to understand if you could give me a rough breakup of what percentage of it would be aluminum and copper?

Question: Hardik Rawat - IIFL Securities Limited - Analyst : All right. And basis the estimates that you've given, you expect the EHV segment to grow roughly by about 60% in terms of sales value. So do you see that mix of sourcing changing? (multiple speakers)

Question: Hardik Rawat - IIFL Securities Limited - Analyst : Absolutely, absolutely. And one last question, if you'll allow me. What are the major countries that you source your metals from? Like top two, three countries, if you can mention.

Question: Hardik Rawat - IIFL Securities Limited - Analyst : Top two to three countries from which you are sourcing the metals that you consume?

Question: Hardik Rawat - IIFL Securities Limited - Analyst : Raw materials, the metals.

Question: Harsh Shah - Jefferies - Analyst : Sir, hi. (technical difficulty) opportunity. Can you just provide the interest breakup for the quarter?

Question: Harsh Shah - Jefferies - Analyst : Okay. Thank you.

Question: Akshay Kothari - Envision Capital Services Private Limited - Analyst : Thanks for the opportunity. Sir, my question is on the supply side. Apart from the major players, we know on the organized side, which are also doing a lot of CapEx on the wire and cables, are we seeing any supply from the unorganized/unbranded players also coming up?

Question: Akshay Kothari - Envision Capital Services Private Limited - Analyst : And based on your experience in this industry, whenever there are -- there is a supply -- so supply actually comes at a point of time and then demand will come over a period of time. So do we see any downward pressure on the margins in the initial phase of the utilization?

Question: Akshay Kothari - Envision Capital Services Private Limited - Analyst : Understood. Lastly, sir, we are the sponsors for RCB. And how has been the response from the southern market post this announcement? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call

Question: Akshay Kothari - Envision Capital Services Private Limited - Analyst : So can you just tell me advertisement expense as a percentage of, say -- how much would it be?

Question: Akshay Kothari - Envision Capital Services Private Limited - Analyst : Okay. Understood. Thanks a lot and all the best.

Question: Prashant Kothari - Pictet Asset Management - Analyst : Yeah, hi. Thank you for the opportunity. Just two questions. One is for dealer/distribution channel revenues. If I look on a quarterly what's happening, the growth was about 31% in the second quarter, 25% in the third quarter, and now it is 15%. So is there a slowdown out there in that channel?

Question: Prashant Kothari - Pictet Asset Management - Analyst : Yeah, and it used to be much higher earlier on. So is there a slowdown in that (multiple speakers) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2023 / 6:30AM, KEIN.NS - Q4 2023 KEI Industries Ltd Earnings Call

Question: Prashant Kothari - Pictet Asset Management - Analyst : Sir, would you expect higher growth rate in the [financial] as well?

Question: Prashant Kothari - Pictet Asset Management - Analyst : Understand, sir. And on the working capital side, excellent management of working capital so far. But you also said that this future cash accruals will be used for Capex, as well as working capital. Are you thinking that the working capital days might expand going forward?