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EBITDA above our estimate; OPM at 6.2% (est. 5.9%)

* RRKABEL’s 3QFY25 earnings were above our estimate due to higher-thanexpected margins in C&W and lower-than-expected losses in the FMEG segment. Consol. Rev increased 9% YoY to INR17.8b (2% above estimates). However, EBITDA declined 2% YoY at INR1.1m (8% above estimates). EBITDA margin declined 70bp YoY to 6.2% (est. 5.9%). Adj. PAT declined 3% YoY to INR686m (18% above our estimate), supported by better operational performance and higher other income (58% above our estimate).

* The management indicated that volume growth was muted to moderate in both wires & cables segments. Exports contributed ~27% (flat QoQ) of cable & wires’ revenues vs. 26% in 3QFY24. Net working capital stood at 65 days vs. 64 days in Mar’24 and 63 days in Sep’24. In the FMEG segment, it recorded robust volume growth in fans, appliances, and switches. The segment’s loss reduced substantially due to savings in operational costs along with a marginal increase in contribution on account of product mix and volume growth.

* We have a BUY rating on the stock. However, we will review our assumptions after the concall on 29th Jan’25.

Revenue up 9% YoY; EBITDA declines 2% YoY

* Consol. revenue/EBITDA/PAT stood at INR17.8b/INR1.1b/INR686m (up 9%/ down 2%/3% YoY and up 2%/ 8%/18% vs. our estimates). Gross margin was down 70bp YoY to 18.3%. Employee cost increased 11% YoY (5.1% of revenue vs. 5.0% in 3QFY24). Other expenses increased 7% YoY (7.0% of revenue vs. 7.2% in 3QFY24).

* Segmental highlights: a) Cables and Wires: revenue was up 8% YoY at INR15.4b, while EBIT declined 6% YoY to INR1.1b. EBIT margin dipped 1pp YoY to 7.0%. b) FMEG business: revenue was up 20% YoY at INR2.4b. EBIT loss decreased to INR44m from INR124m/INR117m in 3QFY24/2QFY25.

* During 9MFY25, revenue grew 12% YoY to INR54b led by 10% growth in the C&W segment and 22% growth in the FMEG segment. EBIT of the C&W segment declined 19% YoY, and EBIT margin was at 6.4% vs. 8.6% in 9MFY24. FMEG segment reported an EBIT loss of INR368m vs. a loss of INR491m in 9MFY24. EBITDA of the company declined 16% YoY to INR2.9b, and OPM was 5.4% vs. 7.2% in 9MFY24. Profit declined 17% YoY to INR1.8b.

Valuation and view

* Profitability of the company has been impacted in YTDFY25 due to volatility in RM prices which has impacted demand and margin of wires. With stability in RM prices seen over last few months; demand is expected to pick up going ahead. In the FMEG segment; revenue growth came above our estimates in 3QFY25 and there was a reduction in EBIT loss led by volume growth and product-mix change.

* We have a BUY rating on the stock. However, we will review our assumptions after the concall on 29th Jan’25 (Concall Link).

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