Fast Cables Ltd (FCL) held its analyst briefing earlier today to brief investors about FY24 results and future outlook:
- The company reported an NPAT of PkR1.89bn (EPS: PkR3.0) during FY24, marking a 9% YoY increase. This was due to higher revenues (up 10% YoY) alongside improving gross margins, which stood at 19% during the year (vs. 18% in FY23).
- For 1QFY25, revenues stood at PkR7.2bn, higher by 6% YoY. However, gross margins declined to 14.7% during the quarter (vs. 16.3% in SPLY) due to increased competition and a shift towards low-margin product sales.
- Management expects FY25E revenues to exceed PkR36bn reported in the outgoing year, with growth dependent on future trends in commodity and currency prices.
- Regarding the sharp rise in other income, which stood at PkR253mn during 1Q (up 4.9xYoY), management stated the increase was driven by finance income from cash invested using IPO proceeds, alongside income from working capital loans of PkR1.5bn extended towards associate companies.
- Raw material costs, primarily copper and aluminium, account for 65% of total revenue, while energy costs represent 4%.
- Export markets demand significant efficiency in the production process. Notably, FCL is the only domestic cable manufacturer certified by the British Approvals Service for Cables (BASEC).
- Management anticipates significant investments in distribution networks once the DISCOs are privatized, similar to when K-Electric was privatized. Note that K-Electric remains one of the company’s largest customers in terms of revenue share.
- The company’s current capacity utilization is between 73% and 75%, with the existing capacity bottleneck at 80% of total capacity.
- The company’s BMR activity, as outlined in the IPO plan, remains on track. The two-part process includes the import of plant and machinery and the construction of buildings, with the expected COD targeted between June and September 25.
- Management stated that dividend policy will remain consistent, where cash flow for future capex alongside paying down short-term liabilities will take priority.
- With the advent of NEVs and charging infrastructure soon, management anticipates significant demand for cables and conductors from this segment. The company is engaged in R&D activities with domestic auto manufacturers, as specialized cables for this sector are currently supplied through imports.
- Management anticipates declining interest rates and recovering economic activity to boost demand for construction, further supported by government projects, where the trend of initially increased construction activity is already evident.
- The company is not under our formal coverage.
Courtesy – AKD Research
