RRKABEL's 4Q FY25 earnings surpassed estimates, driven by higher-than-expected revenue and margins in the Cables and Wires (C&W) segment. Total revenue grew 26% YoY to Rs 22.2 billion, with EBITDA up 69% YoY to Rs 1.9 billion, and a 2.2 percentage point improvement in EBITDA margin to 8.8%. Adjusted PAT rose 64% YoY to Rs 1.3 billion. The company reported robust volume growth of 14% YoY and 24% QoQ in C&W, driven by strong demand in both domestic and export markets. RRKABEL is targeting a ~25% CAGR in cable volume over the next two years, supported by capacity expansion, market share gain, and higher exports, as per Motilal Oswal Financial Services Ltd. report.
The company aims to improve its operating profit margin to double digits by FY28, up from 6.4% in FY25. The FMEG segment is expected to achieve EBITDA break-even by FY26. Based on the strong outlook, Motilal Oswal Financial Services raised its FY26 EPS estimate by 11%, though challenges such as raw material price volatility and increasing competition remain. RRKABEL is valued at 30x FY27E EPS, with a revised target price of Rs 1,230, maintaining a Neutral stance.
RRKABEL's consolidated revenue 4Q FY25 rose 26% YoY to Rs 22.2 billion, driven by strong performance across segments. EBITDA surged 69% YoY to Rs 1.9 billion, while PAT grew 64% YoY to Rs 1.3 billion, surpassing estimates by 7%, 28%, and 33%, respectively. Gross margin improved 1.2 percentage points YoY to around 20%, while employee costs remained controlled, accounting for 3.6% of revenue (down from 4.4% in 4Q FY24). Other expenses grew 24% YoY, but remained stable as a percentage of revenue at 7.2%.
In segmental performance, the Cables and Wires (C&W) segment saw a strong 28% YoY revenue growth to Rs 19.6 billion, with EBIT rising 47% YoY to Rs 1.9 billion and EBIT margin expanding 1.3 percentage points to 10%. The FMEG segment reported a 13% YoY increase in revenue to Rs 2.6 billion but posted a loss of Rs 91 million, an improvement from previous quarters.
For FY25, the company posted 16% YoY revenue growth to Rs 76.2 billion, with the C&W segment contributing 15% and FMEG 20%. However, EBIT in the C&W segment declined 2% YoY to Rs 5.0 billion, with a margin contraction of 1.2 percentage points to 7.4%. The FMEG segment reported an EBIT loss of Rs 459 million, an improvement from the previous year. Despite margin pressures, the company's operating cash flow (OCF) rose to Rs 4.9 billion from Rs 3.4 billion in FY24, while capex nearly doubled to Rs 3.7 billion. Free cash flow (FCF) declined slightly to Rs 1.2 billion from Rs 1.5 billion in FY24.
RRKABEL's management provided key insights into its growth strategy and financial outlook. The company noted that the industry's revenue mix for cables and wires stands at 65:35, while its mix is 70% wires and 30% cables. As part of its future expansion, RRKABEL is focusing mainly on cables, aiming to achieve a revenue CAGR of approximately 18% in the Cables and Wires (C&W) segment.
Additionally, the company announced a fresh capital expenditure (capex) plan of Rs 12.0 billion, which will be completed in phases by March 2028. With this investment, RRKABEL aims to generate Rs 45.0 billion in revenue, maintaining an asset turnover ratio of 3.5x.
On the working capital front, RRKABEL reported a reduction in net working capital days to 56 days, compared to 64 days in March 2024. The company believes a normal working capital cycle should be around 60 days.
RRKABEL's strong performance in the Cables and Wires (C&W) segment, driven by robust volume growth, positive operating leverage, and product mix optimisation, led to a positive earnings surprise. However, near-term challenges include volatility in raw material prices, while long-term competition could increase due to the entry of new players and capacity expansion by existing ones.
