Dynamic Cables Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Record order book, steady execution: The order book hit an all-time high of ₹595 crores, and the ongoing CAPEX remains on track for commissioning by Q1 FY26, with capacity available by Q2.
• Volume-led growth, exports temporarily soft: The majority of H1 and Q2 growth was volume-driven, while exports were impacted by an abrupt spike in sea freight rates; demand remains healthy and a recovery is expected in the coming quarters.
• Margins are structurally stable, not expanding: Gross margins held firm while peers saw softness, a benefit of the company's 100% commodity pass-through contracts and institutional-only focus. Management sees the 10% to 10.5% range continuing.
• New products are seeding the next leg: Railway signaling and covered conductors, launched 2-3 years ago, now contribute high-single-digits to low-teens of revenue, while the newly launched solar DC cable is poised to tap significant tailwinds.
• What to watch next quarter: The pace of export recovery as sea freight normalizes, the BIS license and initial traction for solar DC cables, and any concrete details on the planned greenfield CAPEX.

Demand & Order Book

• Record backlog: The order book of ₹595 crores is the highest ever, comprising only confirmed orders and excluding L1 bids. The execution cycle runs 6 to 9 months.
• Broad-based capex driver: Growth is fueled by government and private sector spending on distribution line upgrades, underground cabling, new electrification, and smart metering, all supported by central and state schemes.
• Volume over price: The majority of growth is volume-driven, though management notes it is difficult to measure volume growth on a like-to-like basis in the cable industry.
• Export disruption, not demand destruction: Exports were hit by a very abrupt rise in sea freight rates in Q2, but the underlying order book is healthy and a pickup is expected in the next quarter or half as rates normalize.
• Bid pipeline undisclosed: Management declined to share the current bid pipeline, calling it information the company does not disclose.

Management: "Largely as the factor which I have already discussed in the previous questions, so demand looks good. I mean, the industry is expecting 12% to 14% kind of growth at the industry level for the cables for next three, four, five years. So, if that kicks in then it's a sunrise moment for the industry I believe."

Margins & Commodity Pass-Through

• Structurally insulated from commodity swings: Commodity prices are a 100% pass-through to customers because contracts are designed that way. The price realization clause operates on a real-time, order-to-order basis, so margin volatility is not present unless there is extreme, unlikely volatility.
• Institutional mix as a moat: Management attributes its margin stability versus peers to being purely institutional and industrial, avoiding the retail segment where peers saw softness from elevated aluminum prices.
• The ceiling is acknowledged: Margins have been stable between 10% and 10.5% for six years, and management foresees this range continuing. Being in a B2B business makes pushing margins further very difficult, even with new product development.
• Value-added products offer no margin uplift: Gross margins on value-added products will remain in the same range (~19%) due to the competitive nature of the industry, with no immediate changes expected.

Ashish Mangal: "Being in a B2B business, it is very, very difficult to kind of push the margin further to be honest. So, we are trying with the new product developments and everything, but I mean it is a difficult thing to crack, honestly. So, as of now, I mean, we foresee 10% to 10.5% range to continue for some time at least."

New Products & Growth Engines

• Solar DC cables launched: The company launched direct current solar cables designed for solar power plants, using the latest technology from its existing plant. The BIS license test is complete and the license is expected very soon, after which the official launch will follow.
• Solar tailwinds are significant: Management believes solar has huge tailwinds and significant demand, starting with the domestic market but representing a global opportunity. A clearer picture on market share is expected in the next two to three quarters.
• Railway signaling steady at 4%: The segment has not performed as well as envisaged but is still contributing around 4% of revenue. The company takes orders selectively based on margin appetite, and capacity is fungible with power distribution cables. The proportion should remain in the 4%-5% range for the current year.
• Data centers and semiconductors in R&D: Data center cables are under product development and R&D, while semiconductors are identified as a growth area for the next five years. The business development cycle for any new cable is always long.
• No house wires, no capacitors: The company has no plans to enter house wires in the next one to two years and is not looking at the capacitor segment.

Capacity & CAPEX

• Current CAPEX on track: The ongoing expansion is on schedule, with plant commissioning expected in Q1 FY26 and capacity available by Q2 FY26.
• Headroom before full utilization: With ₹1,000 crores turnover capacity at 80%-90% utilization, there is scope for another 10%-15% growth before hitting full capacity. The planned CAPEX will increase capacity by ~20%, which should cover next year's growth plan.
• Greenfield CAPEX in planning: The next phase of growth will require another CAPEX, likely a greenfield project larger than normal brownfield CAPEX. Planning is underway in parallel with the current CAPEX, but nothing is concrete yet and details will be shared in due course.
• CAPEX is an ongoing cycle: Management expects CAPEX to be continuous as long as the company is in a growth phase, which is likely for the next two to three years at least.

Ashish Mangal: "Definitely our focus or concentration is to get this CAPEX on time, get our capacities utilized. And in parallel, we are also planning for next phase of growth, because for that we would require another CAPEX to kick in. And that has to be a greenfield project which we will be planning."

International Markets

• U.S. entry is a slow burn: The company received one UL approval for the U.S. market and has applied for others, but management cautions it may take four to six more quarters for sales and marketing efforts to begin after approvals.
• Export recovery tied to freight: The export order book is healthy with no softness in demand; the Q2 dip was purely a logistics disruption from abruptly higher sea freight rates. A pickup is expected in the next quarter or half.

Guidance & Commitments

Key Metrics