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RR Kabel (RRK) 1QFY25 results vs. JMFe saw inline revenue and miss on margins. Rev at INR 18bn up 13% yoy and 3% qoq. Gross margin at 17.4% vs 18.3% YoY and 18.4% QoQ. W&C rev at INR 15.7bn up 11% YoY (Havells W&C +2.4% YoY) and margin at 7.2% vs 8.8% YoY and 8.7% QoQ. (Havells margins at 11.2% down 14bps). RR Kabel EBIT growth down 9.3% YoY vs. Havells up 1% YoY. FMEG rev at INR 2.3bn up 24% YoY and margins at -9% vs -9.2% YoY and -8.4% QoQ. EBITDA at INR 949mn down 16% YoY. OPM at 5.3% vs 7.1% YoY and 6.6% QoQ. PAT at INR 644mn, down 13% YoY and down 18% QoQ.

*  Wires and Cables (W&C): Mix: 70% wire and 30% cables. Volumes: Overall, c.13% growth despite elections. Geography wise: Domestic – c.20% (50% in cables and 7% in wires) and Export was flat due to container shortage (c.24% of revenue). Margins: impacted due to increase in RM price and mix change – higher growth from cables in domestic market. Healthy order book + expects to achieve c.20% volume growth on annual basis. Capacity utilization: 90-95% in cables and 65-70% in wires.

*   FMEG: Growth driven by volume increase in fans, appliances and switches. Ad. spend had increased in 1QFY25 – incurred c.INR 120mn of additional ad. Cost – expect it to normalize going forward.

*   Demand: W&C demand is much higher than capacity addition atleast for next 6/7 years. No oversupply position. In domestic, cable growth is outpacing wire. Growth levers include opportunity in (1) infrastructure, (2) railway, (3) defence and (4) solar.

*   Guidance: In 2QFY25, expect c.15/20% w&c volume growth. In FY25, W&C: Cable volume to grow at c.30% and wire at c.13%. Expect W&C EBITDA margins to increase by 60/80bps YoY led by (1) volume growth (2) premiumization and (3) cost measures. FMEG: Revenue growth of c.25/30% and breakeven by 4QFY25. Capex: INR 5bn over FY24-25 to double up the capacity (INR 2bn incurred in FY24 and bal. INR 3b in FY25). New capex plans from 2QFY25 – shall expand capacity in power cable. WC days: 67 expect to improve further. Long Term: Expect c.20% volume growth in next 2/3 years incl. exports.

*   Outlook and valuation: In the short term – we expect lower volume growth in B2C wires business, however, B2B to continue to see robust growth. Overall, RR Kabel has higher share of B2C and with ramping up of B2B + increasing share of cable, we expect overall value growth of c.17% yoy. Medium/long term – With stabilization of commodity prices, we expect B2C to lead the growth. Further, RR Kabel is focusing on expanding (1) its capacity (2) its global footprint by increasing exports and (3) margin by supply of valueadded products. Overall we expect revenue/ earning CAGR of 18%/38% over FY24-FY26. At CMP, stock is trading at PE of 52x/36x on FY25/FY26 numbers. We value RR Kabel on FY26 earnings and maintain valuation of 40x based on its strong brand, distribution, capacity expansion, export opportunity and cash flow. Our TP is INR 2,030. Maintain BUY

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