Dynamic Cables stock soars 17% on strong Q2 results, robust order book

During the quarter the company saw an uptick in capex spending both by government and private sector derived from increased investment to keep pace with the growing power consumption.

Shares of Dynamic Cables (DCL) soared 17 per cent to Rs 667.60 on the BSE in Wednesday’s intra-day trade after the company reported more-than-double profit after tax (PAT) at Rs 13.9 crore for the September quarter (Q2FY25), on the back of strong operational performance. The smallcap electrical cables company had posted PAT of Rs 5.1 crore in a year ago quarter (Q2FY24). It reported PAT of Rs 11.6 crore in previous quarter (Q1FY25).

The company’s revenue from operations grew 53 per cent year-on-year (YoY) at Rs 234.10 crore, against Rs 153.50 crore in the previous year quarter. Operating margin improved 143 bps YoY at 10.15 per cent. The company’s order book stands at Rs 595.40 crore.

 

At 03:11 PM; DCL was trading 12 per cent higher at Rs 638.95, as compared to 0.14 per cent decline in the BSE Sensex. The stock had hit a 52-week high of Rs 679.85 on June 12, 2024.

The management said, during the quarter, the company has seen a good uptick in capex spending both by government and private sector derived from increased investment to keep pace with the growing power consumption. The management believes that the momentum will continue in the future, providing a sound long term growth opportunity for DCL.

In view of the growing transition towards renewable energy, the company announced launch of Direct Current (DC) solar cables extensively used in solar power plants.

DCL is manufacturer of power infra cables that includes LV, HV, MV, Power control & instrumentation cables, and signaling cables. It supplies cables to Government Discoms, Private Distribution companies, Private EPC contractors, industrial and Export clients.

The cables industry is poised for significant growth, driven by a robust capital expenditure cycle from both the government and private sector. Government initiatives across various sectors - such as power, housing, infrastructure, and digitization - are expected to create substantial business opportunities for the wire and cable industry in the medium to long term.

Additionally, the industry's growth will be propelled by infrastructure development, urbanization, the establishment of smart cities, the expansion of residential and commercial real estate, rural electrification, and the shift towards renewable energy, collectively suggesting a promising future for the cables and wires sector, the company said in its FY24 annual report.

DCL raised capital of Rs 96.5 crore in June 2024 from institutional investors, mutual funds and promoters. As per the management, the proceeds will be used towards greenfield capex for setting up a facility to manufacture cables for the renewable sector and railway signalling cables at Reengus in Sikar district in Rajasthan. The capex has started in FY25 and is likely to be completed by H1FY26.

The management expects this order book and the likely receipt of new orders during the remaining part of FY25 to provide revenue visibility over the medium term. The execution time of orders generally ranges between six-to-nine months. There have not been any delays in the execution of the orders in the past. India Ratings and Research (Ind-Ra) expects the revenue to increase over the medium term, backed by a continued rise in the number of orders and growth in the installed capacity.

Ind-Ra expects the margins to remain at similar levels over the medium term, due to similar nature of operations, and believes the margins would improve once the ongoing capex for high-margin products becomes operational from H2FY26.