R R Kabel (RRKABL IN)

Rating: BUY | CMP: Rs1,035 | TP: Rs1,407

Wired for better future

Praveen Sahay praveensahay@plindia.com 91-22-6632 2369
 R R Kabel

THIS PAGE IS INTENTIONALLY LEFT BLANK

September 20, 2023 2

 R R Kabel

Contents

Page No.

RR Kabel – Focus on growth & market share ........................................................ 5

Story in Charts ....................................................................................................... 8
Fastest growing Wires & Cables company ............................................................ 9
Housing wires fastest growing segment in W&C ................................................. 15
Extensive distribution network ............................................................................. 17
Advertisement focus being B2C play ................................................................... 20
RR Kabel Exports – Visible growth opportunities ................................................ 21
FMEG - Strategic diversification for growth ......................................................... 22
Channel check takeaways ................................................................................... 25
Financials & Valuations ....................................................................................... 26
Estimated Revenue CAGR of 20.7% over FY23-26E ...................................... 26
Stability in Commodity prices, room for GM improvement ............................... 26
EBITDA and PAT CAGR of 38.8% and 44.3% over FY23-26 .......................... 29
Valuations: Superior growth can re-rate the stock ............................................... 31
Story in Charts ..................................................................................................... 32
Key Risks ............................................................................................................. 33
Volatility in prices of raw materials ................................................................... 33
Fluctuation in currency exchange rate ............................................................. 33
Concentration risk in export market.................................................................. 33
Annexure: ............................................................................................................ 34
Board of Directors & KMP ................................................................................ 34

September 20, 2023 3

 R R Kabel (RRKABL IN)
Rating: BUY | CMP: Rs1,035 | TP: Rs1,407

September 20, 2023 Wired for better future

Company Initiation We initiate coverage on RR Kabel with a ‘BUY’ rating and TP of Rs1407
valuing at 35x FY25 earnings. We believe RR Kabel is a play on several
opportunities in the W&C segment given 1) strong brand with diverse product
portfolio 2) well-structured capacity expansion plans, 3) increasing dealers
/distribution network and 4) distribution led export business. Although the
company has grown its FMEG portfolio inorganically, yet it expects to
Key Financials - Consolidated
minimize losses in coming years by transitioning towards premium markets.
Y/e Mar FY23 FY24E FY25E FY26E
Sales (Rs. m) 55,992 67,903 84,886 98,567 In FMEG, too, the company has enhanced its brand presence, positioning and
EBITDA (Rs. m) 3,223 4,915 6,966 8,620 manufacturing capabilities to minimize losses. We estimate
Margin (%) 5.8 7.2 8.2 8.7
PAT (Rs. m) 1,899 3,100 4,534 5,699
Revenue/EBITDA/PAT CAGR of 20.7%/38.8%/44.3% over FY23-26 led by 1)
EPS (Rs.) 19.8 27.5 40.2 50.5 improving business mix 2) operating leverage & cost optimization 3)
Gr. (%) (55.6) 38.5 46.3 25.7
investments in brand building and 4) increasing distribution reach. Initiate
DPS (Rs.) 0.2 0.3 0.3 0.3
Yield (%) - 0.1 0.1 0.1 ‘BUY’.
RoE (%) 14.2 18.6 21.1 21.5
RoCE (%) 16.0 21.5 25.7 27.2 Investment Arguments
EV/Sales (x) 1.8 1.7 1.4 1.2
EV/EBITDA (x) 31.2 24.0 16.9 13.4
PE (x) 52.2 37.7 25.8 20.5  Fastest growing Wires & Cables company: RR Kabel is a fastest growing
P/BV (x) 7.0 6.1 4.9 4.0 player in the W&C segment with reported rev. CAGR of ~40% in W&C vs peers
of ~30% over FY21-23. Robust growth can be attributed to it’s a) strong brand
recognition, b) diverse product portfolio, c) high-quality manufacturing facilities,
and d) wide distribution network. The company accounts for 74% revenue from
B2C and maintained this at higher level, being wire heavy company. RR Kabel
Shareholding Pattern (%) is doing Rs 5bn capex in next two years, aimed at augmenting its production
Promoter’s 62.8 capacity in both wire and cables. The domestic W&C market is expected to
Foreign 3.0 report CAGR of 12.5% over FY23-27 to reach Rs 1200bn, with broad based
Domestic Institution 7.1
Public & Others 27.1 growth across sub-sectors. We expect W&C segment’s revenue CAGR at
Promoter Pledge (Rs bn) - 22.3% over FY23-26E.

 Extensive distribution network & advertisement focus being B2C play:

RR Kabel products are currently being sold through 3,405 distributors & 3,656
dealers covering 114,851 retailers. Widening of distribution network in a
targeted manner through addition of new distributors/dealers and retailers
remains at the core of company’s growth strategy along with increasing
electrician network. The company has consistently invested in brand building
and advertisements (1.5% rev.) to build its B2C business.

 Exports – Visible growth opportunities: RR Kabel is a prominent player in

India's W&C export with ~9% market share. Its robust network of 72 distributors
is spread across key regions like North America, Asia Pacific, Europe, and
Middle East. The company is expected to improve product mix towards cable,
which is better margin product in exports against wire.

Praveen Sahay  FMEG - Strategic diversification for growth: RR Kabel has actively
praveensahay@plindia.com | 91-22-66322369 expanded and diversified its product offerings in the FMEG sector, both
through organic and inorganic means. RRKABL has amalgamated Ram Ratna
Electricals, acquired LED lights business of Arraystorm and home electrical
business of Luminous Power to build its portfolio in FMEG. Company’s focus
is to minimise losses in FMEG business in coming years.

September 20, 2023 4

 R R Kabel

RR Kabel – Focus on growth & market share

RR Kabel is one of the fastest growing consumer electrical company in India, that
has reported revenue CAGR of 43.4% over FY21-23. Incorporated in Feb-95, the
company has wide spectrum of products such as Wires & Cables, Switches, Fans,
Lighting, Switchgears & Appliances.

 RR Kabel is 5th largest player in India’s wires and cables market with ~5%
value market share in FY23. The company has 7% value market share in
branded W&C market as on FY23 compared to 5% in FY15.

 It has highest revenue contribution from B2C sales channel in W&C

business with ~74% of revenue.

 RR Kabel is a leading exporter of wires and cables from India in terms of

value, representing ~9% market share of exports market from India.

 As on FY23 revenue contribution from FMEG segment stood at ~11%; in

which Fan accounts 48%, appliance ~12% and rest lighting & switches.

 RR Kabel has one of the largest network of electricians, covering 298,084

electricians across India and has increased its retailer outlets by 4.4x from
24,347 in FY20 to 114,851 in Q1FY23. The company is a dominant player
in Western & Central India.

 The company has 35 international product certifications, which is one of

the highest in numbers in Indian consumer electrical industry.

 RR Kabel manufactures majority of its products in-house through 5 plants

(2 for W&C and 3 for FMEG) across 5 locations. High degree of backward
integration enables it to maintain full control over quality and supply chain,
lower operational costs and deliver products at competitive prices.

Within W&C, RR Kabel is well placed given a) its strong product portfolio, b) robust
distribution network, c) brand image and d) product quality. Likewise In FMEG
segment, the company has enhanced its brand presence, positioning and
manufacturing capabilities through a) amalgamation of group company Ram Ratna
Electricals (FY20), b) acquisition of Arraystorm (FY20), and c) acquisition of
Luminous fans and lights business (FY23). Over FY20-23, overall
Revenue/EDITDA/PAT CAGR stood at 31.2%/16.3%/15.8% wherein W&C
segment’s Revenue/EBIT CAGR stood at 30.2%/20.9% and FMEG’s Revenue
CAGR stood at 49.5%.

September 20, 2023 5

 R R Kabel

W&C contributes 88.6% of revenue Export contribution highest in sector at 23% rev.

FMEG Revenue mix - FY23 Outside Revenue mix - FY23

12% India
23%

Wires and India

Cables 77%
89%

Source: Company, PL Source: Company, PL

RR Kabel - One of India’s Leading Consumer Electricals company

Source: Company, PL

September 20, 2023 6

 R R Kabel

RR Kabel – Transitioned to diversified Electricals company

Source: Company, PL

RR Kabel – Well positioned to Consumer Electricals industry

Source: Company, PL

September 20, 2023 7

 R R Kabel

Story in Charts

Expected revenue CAGR of 20.7% over FY23-26E W&C rev. expected CAGR of 22.3% over FY23-26E

Revenue (Rs bn) YoY gr % (RHS) W&C rev. (Rs bn) YoY gr % (RHS)

120 61% 70% 100 63% 70%

100 60% 60%
80
50% 50%
80
40% 60 40%
60 28% 25% 27%
21% 30% 21% 23% 30%
40 17%
40 16%
10% 20% 12% 20%
20 20
10%
27

44

68

85
56

99 10%

25

41

50

61

77

91
- 0% 0 0%
FY21 FY22 FY23 FY24E FY25E FY26E FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Margins to expand by ~300bps over FY23-26E Expected PAT CAGR of 44.3% over FY23-26E

EBITDA (Rs bn) Margin % Adj. PAT (Rs bn) YoY gr % (RHS)

10.0 9% 10% 6.0 7%

8% 8% 6%
5% 6%
8.0 7% 7% 8% 5.0 5% 5%
5%
6% 5%
4.0
6.0 6% 3% 4%
3.0
4.0 4% 3%
2.0
2%
2.0 2%
1.4

2.1

1.9

3.1

4.5

5.7
1.0
2.3

3.0

3.2

4.9

7.0

8.6

1%
- 0% - 0%
FY21 FY22 FY23 FY24E FY25E FY26E FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

W&C margin to expand by 180bps over FY23-26E W&C revenue contribution continues to be higher

Wires and cables EBIT margin (%) Wires and Cables FMEG
FMEG EBIT margin (%)

15.0%
6%
7%

7.5% 8.9% 9.0% 7.8% 7.1% 8.0% 8.6% 8.9%

8%
9%
10%
12%

10.0%
5.0%
0.0% -3.9% -4.7% -3.1%
-6.4%
94%

-9.2%
93%

-5.0%
92%
91%

-10.9%-10.7%
90%
89%

-10.0% -14.7%
-15.0%
-20.0%
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

September 20, 2023 8

 R R Kabel

Fastest growing Wires & Cables company

RR Kabel is a India’s fastest growing player in the Wires and Cables industry with
reported revenue CAGR of ~40% vs peers of ~30% over FY21-23. The robust
growth can be attributed to it’s a) strong brand recognition, b) diverse product
portfolio, c) high-quality manufacturing facilities, and d) a wide distribution network.
RR Kabel excels in domestic markets with a significant 74% revenue contribution
from B2C segment in Q1FY24. The company is also a prominent player in
international market with 47.1% CAGR in exports revenue over FY21-23. Overall
revenue grew at CAGR of 43.4%, reaching Rs 56bn, mainly with robust growth in
W&C segment and acquisition led growth in FMEG.

 Growth in W&C: W&C business of RR Kabel grew at 18.1% CAGR over

FY14-23 against peers KEI/Polycab of 16%/13% over same period.

 Housing wires contribution: Domestic W&C market is valued at Rs

748bn. We expect 12.5% CAGR over FY23-27E with branded players pie
to increase to 80% in FY27 from 72% in FY23. Further, housing wires that
accounts for 32.8% of domestic W&C market is also expected to reach
34.6% over FY23-27E and accordingly branded players’ market share in
will also reach 70% in FY27 from 55% in FY23. This will result in 21%+
CAGR in branded housing wire market and RR Kabel being one of leading
player with 18.8% market share in branded housing wire segment stands
as a major beneficiary.

 Market share focus: The company added six winning states in last 3
years, reached 12 states having >9% market share in FY23 from 6 states
in FY20. It also invested in market expansion in seeding states (around 12
states) to drive future growth.

RR Kabel outperforms peers in W&C revenue growth (21.7% CAGR over FY19-23)

Finolex KEI Polycab RR Kabel Havells

W&C Revenue (Rs bn)

209
179

105
155

93
91

91
81
78
125

77
69
65

61
107

55
53

50
46

43
41

41
37

36
35

32

32
30
30

76
28

75

26

25
23

22
69

FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

September 20, 2023 9

 R R Kabel

Cable and Wires offering vs peers

Flexible and
Power Cable Control and Housing
Company Communication Cable Specialty
(LT/HT/EHV) Instrumentation Cable Wires
cables
KEI Industries Ltd ✓✓ ✓ ✓ ✓ ✓
Havells India Ltd ✓ ✓ ✓ ✓ ✓✓
Finolex Cables Ltd ✓ ✓ ✓ ✓✓ ✓
Polycab India Limited ✓✓ ✓ ✓ ✓ ✓
R R Kabel Ltd ✓* ✓ ✓ ✓✓ ✓
Source: Company RHP, PL; Note: *RR Kabel does not manufacture EHV power cables, LT-Low Tension, HT-High Tension, EHV-
Extra High Voltage, ✓ - Presence, ✓✓- Primary sub-category

RR Kabel – W&C revenue CAGR of 22.3% over FY23-26E

W&C rev. (Rs bn) YoY gr % (RHS)

100 63% 70%
90
60%
80
70 50%
60 40%
50 27%
40 23% 30%
21%
17%
30 12% 20%
20
10%
10
25

41

50

61

77

91
0 0%
FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

Market share in domestic branded W&C market RR Kabel gaining MS in dom. branded market
KEI KEI
10% FY15 12% FY23
Havells
Others 12% Havells
36% Others 11%
39%

Finolex
Finolex
9%
13%

RR Kabel
5% RR Kabel Polycab
Polycab
7% 22%
24%
Source: Company, PL Source: Company, PL

 Scaled B2C Business: RR Kabel is one of India’s leading consumer electrical

B2C a major revenue driver, with a
~74% share in 1QFY24
companies in the housing wire segment with ~10.4% market share in the
domestic housing wire market as on FY23. Over the years, the company has
built its housing/retail wires (i.e. B2C) to ~70% of W&C revenue thereby driving
B2C sales. In Q1FY24, 74% revenue came from B2C and RR Kabel has
maintained this position at higher level, being wire heavy company.

September 20, 2023 10

 R R Kabel

RR Kabel B2C W&C business delivered ~30% CAGR over FY20-23

B2C - W&C revenue (Rs bn) B2C contribution (%) (RHS)

40 80% 80%
35 80%
79%
30
79%
25 78%
77%
20 77% 78%
77% 77%
15
77%
10
76%
5 76%
17 20 32 38
- 75%
FY20 FY21 FY22 FY23

Source: Company, PL

 Large Scale Manufacturing: RR Kabel owns and operates five integrated

manufacturing facilities in Waghodia, Silvassa, Roorkee, Bengaluru and
Gagret that are accredited to Indian and international standards, and
capable of precision manufacturing its wide range of products.

 In-house manufacturing with high degree of backward integration:

W&C is produced entirely in-house, while FMEG’s in-house manufacturing
is 37% of total sales. The company sources 63% of FMEG products from
more than 25 OEMs. In 1QFY24, overall rejection rate for W&C stood at
~0.12%. RR Kabel is backward integrated and manufactures several key
raw materials in-house, at its Waghodia and Silvassa facilities. These RMs
include PVC compound, low smoke zero halogen (LS0H) compound,
cross-linked polythene compound and solar cable compound.

 Strategic located facilities: Manufacturing facilities and warehouses are

strategically located to achieve shorter time to market, greater cost
competitiveness (via proximity to RM suppliers), and responsiveness of
inventory positions to changes in the portfolio market. This allows the
company to cater to domestic and international markets.

 Company expanding its Capacity: RR Kabel is doing Rs 5bn capex in

next two years, aimed at augmenting its production capacity in both wire
and cables. The company's strategic plan involves increasing cable
production capacity by 2.4 times the current level within next two years,
while also targeting an annual wire capacity increase of 20%. These
expansion initiatives are strategically designed to effectively meet the
anticipated demand, as per the management's projections.

September 20, 2023 11

 R R Kabel

RR Kabel building capacity for future growth – enhancing cable capacity by 2.4x

Source: Company, PL

RR Kabel is focused on in-house manufacturing to maintain quality

Source: Company, PL

RR Kabel maintain higher in-house manufacturing

Companies In-house Manufacturing (%) Outsourced (%)
RR Kabel 93% 7%
Havells 90%+ <10%
Polycab 95% 5%
KEI 95% 5%
Finolex 97% 3%
V-Guard 45% 55%
Source: Company, PL

September 20, 2023 12

 R R Kabel

Over FY20-23 incurred capex of Rs4.15bn

Capex (Rs mn)

1,831

1,012
846

463

FY20 FY21 FY22 FY23

Source: Company, PL

RR Kabel has 35 international

product certifications, one of the
 Focus on innovation & product quality: RR Kabel is the first company
highest among peers in India to achieve REACH compliance, the European standards aimed at
safeguarding human health and environmental well-being in chemical
utilization. RR Kabel has 35 international product certifications, one of the
highest among its Indian consumer electrical peers as of FY23. This
achievement serves as a compelling testament to company's quality and
safety product portfolio, positioning it prominently as a leader within its
domestic and export market.

 As on Jun’23, RR Kabel has a dedicated R&D team of 60, of which 22

exclusively work on R&D involving FMEG products.

RR Kabel – Innovative & quality products focus

Source: Company, PL

September 20, 2023 13

 R R Kabel

RR Kabel’s product certification vs peers reflects product quality

Players Certifications
ISO 9001, 14001, 45001, BASEC (UK), UL (USA), CSA (Canada), VDE (Germany), Intertek, CE (Europe) and TUV
RR Kabel
Rheinland (Germany), REACH (Europe), RoHS (Europe), CPR (Europe)
Finolex Cables ISO 9001, 14001, 14000
Polycab ISO 9001, 14001, OHSAS 18001
ISO 9001, 14001, 45001, 17025, NABL, Achilles UVDB, CEOC, KEMANGCP, DNV-TAE00003U5, DNV-TAE00003U6, DNV-
KEI Industries
TAE00003U7, DNV-TAE00003U8
Havells ISO 9001, 14001, 45001, 50001, OHSAS 18001
SABS, SASO, UL (USA), SIRIM, SLS, KBS, SONCAP, CE (Europe), ESMA, KUCAS, ISO 27001, 10002,9001, 14001,
Bajaj Electricals
OHSAS 18001
Crompton ISO 9001, 14001, 45001
V-Guard ISO 21702, 9001, 14001, 694, 12615, 8472, OHSAS 18001, JIS Z 2801, QCFI-JUSE, BIS
Source: Company, PL

RR Kabel’s Wires & cables sales RR Kabel reported superior growth over peers
have grown at a CAGR of 21.7% over CAGR
FY19-23. RR Kabel has scope for Particulars (Rs mn) FY19 FY20 FY21 FY22 FY23 %
margin expansion given superior FY19-23
scale over peers Wires & Cables Revenues
RR Kabel 22,577 22,488 25,202 41,113 49,585 21.7
Finolex Cables 29,833 27,701 26,315 35,730 42,626 9.3
Havells 32,346 29,942 31,802 46,451 55,326 14.4
KEI 33,636 39,859 35,743 51,231 62,539 16.8
Polycab 69,295 75,192 75,806 1,06,953 1,26,805 16.3

Wires & Cables EBIT

RR Kabel 1,690 1,991 2,269 3,227 3,516 20.1
Margin (%) 7.5 8.9 9.0 7.8 7.1
Finolex Cables 4,474 4,035 3,490 3,918 4,705 1.3
Margin (%) 15.0 14.6 13.3 11.0 11.0
Havells* 5,208 4,881 4,039 5,388 5,256 0.2
Margin (%) 16.1 16.3 12.7 11.6 9.5
KEI 3,666 4,424 4,110 4,867 5,691 11.6
Margin (%) 10.9 11.1 11.5 9.5 9.1
Polycab 8,385 9,249 9,097 10,374 16,611 18.6
Margin (%) 12.1 12.3 12.0 9.7 13.1
Source: Company, PL *contribution margin

September 20, 2023 14

 R R Kabel

Housing wires fastest growing segment in W&C

The domestic W&C market is expected to report CAGR of 12.5% over FY23-27E
to reach Rs 1200bn with broad based growth across sub-sectors. However, housing
wires segment expected CAGR of 14% over same period is relatively better than
others segments. W&C industry continues to benefit from resilient tailwinds such as
a) rural electrification, b) healthy growth in commercial real estate sector, c)
increase in per capita consumption of electricity, d) continued expansion of
residential real estate sector, e) transition towards clean green energy, f) China+1
strategy, g) government initiatives to boost production and exports, and h)
emergence of new-age sectors like data centres. Additionally, shift towards branded
players, technological intervention, and marketing initiatives are aiding branded
players’ growth. RR Kabel being one of the leading player in segment, is well
positioned to benefit from this.

Expected industry Cagr of 13% over FY27E Housing wires growing at relatively faster rate
Control & Communication
W&C Market Size (Rs bn) Instrumental W&C Market
Cable Segm entation (FY23)
Cable 3%
1400 15%
1200
1200 FY23-27 Category
Housing w ise CAGR
Wires
1000 13%
33%
748
800 Flexible & 14%
Specialty
600
Cables
400 25% 13%

200 13%
0 Power Cable
(LT/HV/EHV) 13%
FY23 FY27P
25%

Source: Company, PL Source: Company, PL

W&C segment - Across all sub-sectors and a shift to branded players

FY23 FY27P
Unbranded
Unbranded 20%
28%

Branded
72% Branded
80%
Source: Company, PL

September 20, 2023 15

 R R Kabel

Housing wire – Branded HW expected 21.1% CAGR over FY23-27E

Branded Housing wire Non-branded Housing wire (Rs bn)

125

110
291

135

FY23 FY27P

Source: Company, PL

Housing wires – RR Kabel have 18.8% branded market share

Non branded RR Kabel - Wire revenue (FY23) Others

Others
45%

Non branded Branded

45% 55%

RR Kabel - Wire
revenue (FY23)
10%

Source: Company, PL

September 20, 2023 16

 R R Kabel

Extensive distribution network

RR Kabel has demonstrated ability to identify opportunity in winning states and

accordingly it has grown market share (~7% value market share in branded W&C
market) with targeted initiatives through micro-market approach. In addition to its
strong brand legacy, RR Kabel’s pan-India distribution network has been a key
enabler in company’s growth. Currently products are sold through 3,405 distributors
& 3,656 dealers covering 114,851 retailers. Widening of distribution network in a
targeted manner through addition of new distributors, dealers and retailers remains
at the core of company’s growth strategy along with increasing its electrician
network (influencer).

 RR Kabel has one of the largest network of electricians, covering 271,264

electricians across India, as of Mar-23 (increased from 26,053 in FY20).
Further, RR Kabel has implemented a partner loyalty program for retailers
and electricians, including RR Connect’s mobile phone application, web
portal and rewards schemes (RR Dosti 3.0, Udaan 3.0) which have
accelerated company’s growth.

Growing distribution network  As of Jun’23, RR Kabel had 21 warehouses across India’s 17 states along
with UTs; it aims to consolidate them over time. Warehouses are
strategically located to optimize distribution by transport to achieve an
optimal balance between lead time to service and distribute costs.

 In FY20, RR Kabel initiated 'Project KaRRma' in two phases, aiming to

enhance its market presence in house wires segment. The project
involved expansion of retail outlets, strengthening electrician network,
augmenting sales force, and diversifying its product portfolio. The
overarching objective is to double the market share in domestic housing
wires and extending reach in micro and nano markets. To achieve these
goals, RR Kabel maintains regular contact with retail outlets through
routine visits and has implemented loyalty management programs tailored
for electricians and retailers. As of Jun-23, the company has employed
789 sales and marketing professionals to collaborate with distributors,
dealers and retailers to enhance its market presence.

 In FY20, RR Kabel initiated 'Project Lakshya,' a five-year initiative

consisting of two phases. The first phase is focused on expanding the fans
and lights portfolio through deployment of field sales officers.
Subsequently, in the second phase, RR Kabel plans to integrate its
Luminous Fans and Lights business. The overarching goal of this project
is to consolidate the Luminous HEB by optimizing synergies across
various aspects from manufacturing to sales. This includes design
integration and streamlining of functions such as warehousing, logistics,
procurement and sales.

 RR Kabel has a focused approach towards expanding its market presence

across different domestic regions. To achieve this, the company has
classified its geographical presence within India into three categories: a)
Winner States - value market share >9%, b) Growing States - value market
share between 5%-8.9%, and c) Opportunity States - value market share
<5%.

September 20, 2023 17

 R R Kabel

Retailer & Electrician grew 11.4x/4.7x from FY20 Growing dealer/distribution network

Electricians Retailers Distributors Dealers

2,98,084
2,71,264
1,47,810

1,14,851
1,06,626
61,224

58,872
30,570
26,053
24,347

2,519

2,810

1,844
3,092

3,296
3,444

3,405
3,656
1,423
1,083
FY20 FY21 FY22 FY23 Q1FY24 FY20 FY21 FY22 FY23 Q1FY24

Source: Company, PL Source: Company, PL

Pan-India dealer-distributor network

FY20 FY21 FY22 FY23 Q1FY24

1,724 1,701
1,622

1,608 1,603 1,164

1,576
1,116
1,182 895 1,196
1,093
837 905
1,051 1,066
560 892 787
859 437 943 751 698
351
Central East North South West

Source: Company, PL

RR Kabel’s continuously gaining market share

Winner States (market share >9%) Growing States (Market share 5%-9%)
Opportunity States (Market share <5%)

16
15 15 15

12 12 12
11
9

6
5
4
3 3
1

FY20 FY21 FY22 FY23 Q1FY24

Source: Company, PL

September 20, 2023 18

 R R Kabel

Demonstrating market Share improvement

Source: Company, PL

Dealers/distributors network Distribution network peers’ comparison

continuously expanding for RR Kabel Dealers/ Dealers/
Retails Outlets Retails Outlets
Players Distributors Distributors
(Fiscal 2021) (Fiscal 2023)
(Fiscal 2021) (Fiscal 2023)
RR Kabel 4,233 6,740 30,570 1,06,626
Finolex Cables 5,000 5,000+ 90,000 1,75,000
Polycab 4,100+ 4,300+ 1,65,000+ 2,05,000+
KEI Industries 1,655 1,900+ NA NA
Bajaj Electricals 500+ 700+ 2,18,000+ 2,00,000+
Crompton NA 4,000+ NA 1,50,000+
V-Guard NA NA 40,000+ 60,000+
Source: Company, PL

September 20, 2023 19

 R R Kabel

Advertisement focus being B2C play

RR Kabel has highest revenue contribution (~74% of revenue in Q1FY23) from B2C
sales channel in its W&C business. The company gives huge importance to its
advertisement & promotional strategies given 1) increase in market share gains 2)
rising awareness among consumers towards safety & quality and 3) increasing
technological & product complexities.

Further, to enhance brand positioning of B2C players over next few years,
companies have consistently invested in brand building and advertisements
including ATL and BTL marketing. RR Kabel spend ~60% of marketing expenditure
on BTL activities in rural & urban areas, then remaining on ATL activities. The
company has partnered with a leading Bollywood actor and sponsored Bengaluru
Pro Kabaddi Team in 2019 and KKR, IPL team franchise, in 2021.

B2C driving business Higher Adv. 1.5% sales, improving reach

B2C B2B RR Kabel KEI Polycab Finolex Cable

2.5%

1.9%

1.5%
2.0%
23% 20% 23% 23% 26%

1.1%
1.5%

1.0%
0.9%

0.7%
0.5%
1.0%
77% 80% 77% 77%

0.3%
74%
0.5%

0.0%
FY20 FY21 FY22 FY23 Q1FY24 FY20 FY21 FY22 FY23

Source: Company, PL Source: Company, PL

Multi-pronged approach to increase awareness Loyalty Management Programs

Source: Company, PL
Source: Company, PL

Connecting with electricians by physical & digital Mrktg Initiatives

Source: Company, PL

September 20, 2023 20

 R R Kabel

RR Kabel Exports – Visible growth opportunities

RR Kabel is a prominent player in India's W&C export landscape commanding a

substantial ~9% market share in terms of export value. The company currently
exports across 63 countries and had 35 international product certifications at
1QFY24 end.

 Majority of RR Kabel's products are exported under the RR Kabel brand, while
they also engage in private label manufacturing for select clients. The company
has cultivated enduring partnerships with 10 well-established distributors
operating in these international markets, effectively covering a significant portion
of their export operations. About 99% export revenues are derived from
distributors & rest 1% from OEMs.

 RR Kabel has a robust network of 72 distributors spread across key regions,

including North America, Asia Pacific, Europe, and Middle East. In addition to
this, they have established an efficient network of shipping agents for cargo
handling, transportation, delivery at destination, and load port operations,
catering to both export and import cargo needs.

RR Kabel - Largest Exporter of Wires & Cables from India

Exports Revenue (Rs bn)

16.0 36%
48%
14.0
13.83
12.0 12.7
10.0
5%
8.0
6.0 6.93
-10%
4.0 18%
2.0 2.94 0.43
-
RR Kabel Polycab India KEI Industries Havells India Finolex Cables

Source: Company, PL Export Revenue CAGR (FY21-23)

Export rev. delivered ~36% CAGR over FY20-23 UAE and UK – major contributors to export rev.
New Zealand Belgium Australia
Exports Revenue (Rs bn) 1% Q1FY24
Slov enia 2% 1%
Revenue Contribution (RHS) 10%
Mauritius
14.0 26.9% 30.0% 4% UAE
12.0 21.5% 23.0% 22.7% 37%
20.4% 25.0%
10.0 20.0% USA
13%
8.0
15.0%
6.0
10.0% My anmar
4.0 2%
2.0 5.0%
- 0.0%
FY20 FY21 FY22 FY23 Q1FY24 UK
30%

Source: Company, PL Source: Company, PL

September 20, 2023 21


Domestic FMEG market valued at
~Rs 1064bn and expected CAGR of
~8% over FY23-27E
Accelerate growth of FMEG
business: a) Leverage Well-
recognized Brand, b) Focus on
Premiumisation, c) Grow Omni-
channel presence, d) Focus on
Achieving Operational Excellence
Develop RR Signature brand for
premium FMEG products
September 20, 2023
R R Kabel
FMEG - Strategic diversification for growth
RR Kabel has actively expanded and diversified its product offerings in the FMEG
sector, both through organic and inorganic means. The domestic FMEG market is
valued at ~Rs 1064bn with expected CAGR of ~8% over FY23-27E. RR Kabel's
product portfolio covers ~77% of this market, making it well-poised to capture a
substantial share of expected growth in FMEG segment. The company boasts an
extensive presence across various distribution channels, wide-reaching distribution
network, and diverse product portfolio that caters to various price points within the
segment. Additionally, RR Kabel possesses a keen ability to identify product gaps
in FMEG market, further enhancing its growth prospects. We anticipate single-digit
growth for RR Kabel in this segment while simultaneously minimizing losses in
coming years on account of scaling up of FMEG business and integration of
acquired assets.
 Acquisition to growth business: RRKABL has amalgamated the business
from one of its group companies, Ram Ratna Electricals Ltd, and acquired LED
lights business of Arraystorm Lighting Pvt Ltd, along with its trademarks and
design certificates, to expand FMEG portfolio in FY20. Further in May-2022,
acquired the corresponding home electrical business (HEB) of Luminous Power
Technologies Pvt Ltd and also obtained a limited and exclusive license to use
the ‘Luminous Fans and Lights’ brand for fan and light products for an initial
period of two years, subject to extension of six months at a time for a maximum
of four times and, that includes a right to use 61 registered trademarks, and a
portfolio of lights and premium fans, to strengthen its FMEG portfolio.
 Positioned as a mass premium brand: After initially venturing into economy
categories across segments, RR Kabel gradually expanded its product range in
premium segments through Luminous acquisition. Its products are generally
priced at a discount to leading brands. However, RR Kabel is focused on
augmenting innovation and improving penetration of premium products in large
categories like Fans, Lighting and Switches. The company aims to develop and
establish its RR Signature brand for premium FMEG products in replacement of
the Luminous Fans and Lights brand by FY24.
 RR Kabel has created a dedicated space for switch and switchgear at its
Waghodia facility and intends to integrate the Roorkee and Gagret facilities of
FMEG over time with capacity addition. It also aims to enhance capacity for the
Bengaluru facility. Currently, FMEG is 37% in-house manufacturing and rest
sourced through OEMs.
22
 R R Kabel

RR Kabel is present across large range of product categories; Fans/Lighting/Switches/Switchgear/Appliances

Players Fans Lightings Switches Switchgears Water Heaters Home App Kitchen App
Bajaj Electricals Ltd       
Crompton Consumer       
Finolex Cables Ltd       
RR Kabel       
Havells India Ltd       
Orient Electric Ltd       
Philips India       
Polycab India Limited       
Surya Roshni Ltd       
TTK Prestige Ltd       
Usha International Ltd       
V-Guard Industries Ltd       

Source: Company, PL

Revenues CAGR of 53% over FY21-23 FMEG to contribute 13.3% of FY23 sales

FMEG (Rs bn) YoY growth (%) (RHS) FMEG

10.0 135.5 160 14.0%

11.6%
140 12.0% 10.2%
8.0 120 10.0% 8.7% 8.0%
7.9% 7.5%
6.0 100
8.0% 6.2% 6.3%
80
4.0 6.0%
31.0 34.9 60
40 4.0%
2.0 5.1 6.8 6.8 6.9
20 2.0%
- 0 0.0%

FY24E

FY25E

FY26E
FY24E

FY25E

FY26E

FY19

FY20

FY21

FY22

FY23
FY19

FY20

FY21

FY22

FY23

Source: Company, PL Source: Company, PL

RR Kabel grew FMEG portfolio inorganically over FY20-23; Losses to minimize with scale of operations
CAGR % CAGR %
Particulars (Rs mn) FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E
FY18-23 FY23-25
FMEG Revenues
Bajaj Electricals (CP + Lighting) 22,285 27,408 30,846 33,035 43,712 48,774 54,928 62,921 17.0 13.6
Crompton (ECD + Lighting) 41,051 44,789 45,120 48,035 53,941 58,138 62,574 73,098 7.2 12.1
Havells (ECD+Lighting+Others ) 27,383 34,056 33,582 41,275 52,241 58,630 64,272 72,168 16.4 10.9
Polycab (FMEG) 4,853 6,433 8,356 10,341 12,544 12,607 14,439 16,745 21.0 15.2
RR Kabel (FMEG) 1,481 1,939 2,039 2,750 6,475 6,915 7,388 NA 6.8
FMEG EBIT (Rs mn)
Bajaj Electricals (CP + Lighting) 1,087 1800.709 2,082 3,240 2,468 2,659 3,497 4,832 19.6 34.8
Margin (%) 4.9 6.6 6.8 9.8 5.6 5.5 6.4 7.7
Crompton (ECD + Lighting) 6,820 7,230 7,411 8,554 9,545 10,675 11,643 13,662 9.4 13.1
Margin (%) 16.6 16.1 16.4 17.8 17.7 18.4 18.6 18.7
Havells (ECD+Lighting+Others ) 7,558 9,218 8,993 6,448 7,767 7,015 7,394 9,279 -1.5 15.0
Margin (%) 27.6 27.1 26.8 15.6 14.9 12.0 11.5 12.9
Polycab (FMEG) 88 75 168 566 196 -56 505 921 -191.3 NA
Margin (%) 1.8 1.2 2.0 5.5 1.6 -0.4 3.5 5.5
RR Kabel (FMEG) -58 -178 -301 -298 -695 -445 -345 NA NA
Margin (%) -3.9 -9.2 -14.7 -10.9 -10.7 -6.4 -4.7

Source: Company, PL *Havells Contribution Margins

September 20, 2023 23

 R R Kabel

FMEG opportunity market of Rs 1064bn with growth across all Sub-categories

Source: Company, PL

RR Kabel wide FMEG product portfolio

Source: Company, PL

September 20, 2023 24

 R R Kabel

Channel check takeaways

 Market share gains: RR Kabel is focused on increasing its market share
through increasing channel partner & electricians. It has also strengthened
sales force and increased its direct engagement with institutional clients to gain
volume. The company has digitized most of its payments to dealers and
electricians, which helped them in market coverage.

 Focus of advisements & promotions to drive growth: Company has

continuously focused on advertisement and promotions/offers to drive growth
in last 5 years, e.g. dealers received ~2.9% discounts on advance payments
and institutional buyers were given best pricing in order to gain volume.

 Demand continues to improve with end user industry: The demand has
progressively improved MoM led by housing wires, on account of good traction
in real estate sector. Demand momentum witnessed in Q1FY24 has seen
some softness in August due to rain & fluctuation in copper prices, while next
six months are expected to be healthy mainly from real estate where RR Kabel
has major focus. Smaller towns continue to lead growth for the company.

 Product quality and best pricing: Company maintained competitive pricing

without compromising on quality.

 FMEG – Growth through acquisitions; expected to minimise losses: Our

channel checks indicated that the company initially followed an outsourcing
model, collaborating with manufacturers in Gujarat and South India for
switches etc. Subsequently expanded portfolio by acquiring the LED business
of Arraystorm Lighting and the fan and light business of Luminous. Luminous
along with the strong brand legacy is enabling customer acquisition. Premium
positing expected to minimise losses.

RR Kabel – Offering entire range of Electrical Products

Source: Company, PL

September 20, 2023 25

 R R Kabel

Financials & Valuations

Estimated Revenue CAGR of 20.7% over FY23-26E

We expect healthy revenue growth from capacity expansion in cable (2.4x existing
capacity in next two years) and extensive distribution network expansion; overall
topline to register ~21% CAGR over FY23-26E to Rs98.6bn. We expect Wires &
Cables sales CAGR of 22.3%, while FMEG at lower rate of 6.8% CAGR over FY23-
26 to stabilize the acquired businesses.

Revenue CAGR of 20.7% over FY23-26E W&C rev. expected 22.3% CAGR over FY23-26E

Revenue (Rs bn) YoY gr % (RHS) W&C rev. (Rs bn) YoY gr % (RHS)

120 61% 70% 100 63% 70%

100 60% 60%
80
50% 50%
80
40% 60 40%
60 28% 25% 27%
21% 30% 21% 23% 30%
40 17%
40 16%
10% 20% 12% 20%
20 20
10%
27

44

68

85
56

99

10%
25

41

50

61

77

91
- 0% 0 0%
FY21 FY22 FY23 FY24E FY25E FY26E FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Revenues CAGR of 16.7% over FY21-23

CAGR %
Particulars (Rs mn) FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
FY23-26
Revenue
Finolex* 24,491 25,431 24,448 28,151 30,778 28,773 27,681 37,681 44,811 52,510 60,847 72,965 17.6
KEI 20,330 23,510 26,285 34,655 42,310 48,878 41,815 57,270 69,123 82,380 96,240 1,09,874 16.7
Polycab 47,046 52,024 55,001 67,703 79,856 88,300 87,922 1,22,796 1,41,078 1,73,732 2,00,789 2,34,217 18.4
RR Kabel 13,013 14,423 15,754 19,800 24,052 24,785 27,239 43,860 55,992 67,903 84,886 98,567 20.7
Wires & Cables Revenue
Finolex 24,301 25,221 25,463 27,831 29,833 27,701 26,315 35,730 42,626 NA NA NA
KEI 18,162 20,062 21,818 28,139 35,017 41,235 37,159 53,491 65,090 77,818 91,348 1,05,000 17.3
Polycab 43,887 52,634 56,082 62,423 69,295 75,192 75,806 1,06,953 1,25,369 1,54,861 1,78,946 2,08,697 18.5
RR Kabel 13,013 14,423 15,754 19,800 22,577 22,488 25,202 41,113 49,585 60,988 77,498 90,670 22.3
Havells 21,904 24,595 26,756 26,834 32,346 29,942 31,802 46,451 55,326 69,158 80,914 93,051 18.9

Source: Company, PL

Stability in Commodity prices, room for GM improvement

The major raw materials encompass aluminum, copper, galvanized iron, PVC, low
smoke zero halogen compound, master batch, solar cable compound, and cross-
linked polythene compound. The company also produces PVC compound, low
smoke zero halogen compound, cross-linked polythene compound, and solar cable
compound in-house while procuring copper and aluminum at prevailing market
prices.

September 20, 2023 26

 R R Kabel

Historically, RR Kabel has experienced notable increase in price of key raw

materials, and there is uncertainty regarding its ability to pass on these cost
increase to consumers.

Typically, the company maintains an inventory of 20-25 days' with raw materials
and WIP at its factories. Despite this, there have been instances when inventory
shortages have occurred. In the past, there were three instances where shipments
of PVC resin, each totaling 500MT, were delayed by ~50 days. As a result, RR
Kabel had to procure these materials at a higher cost from local suppliers.

The company has established agreements with various suppliers, predominantly

for copper and aluminum, which grant them a pricing window of 30 to 45 days from
the date of raw material delivery to determine the prices of its products.

CU and AL accounts >82% RM consumed Domestic RM sourcing increased to 76.5%

Consumption of Copper and aluminum (Rs mn) Domestically sourced RM Non-Domestically sourced RM
% of RM consumed (RHS)

40,000 84.6% 85.0%

35,000 84.1% 84.5%
27.8 29.2 29.8 23.5
30,000 84.0%
25,000 83.5%
82.7%
20,000 82.4% 83.0%
15,000 82.5% 72.2 70.8 70.3 76.5
10,000 82.0%
5,000 81.5%
- 81.0%
FY21 FY22 FY23 Q1FY24 FY21 FY22 FY23 Q1FY24

Source: Company, PL Source: Company, PL

Due to inflationary commodity price environment over FY20-22, RR Kabel’s gross

margins contracted by 460bps over FY20-22 mainly because commodity prices-
Copper/ Aluminum/ Brent Crude increased at a CAGR of 32%/ 29%/ 28%.

With softness in commodity environment in FY23, RR Kabels’s gross margin

expanded by 50bps over FY22-23. Further with stabilization in RM prices and
product mix improvement, we are expecting gross margin to improve by 200bps
over FY23-26E.

September 20, 2023 27

 R R Kabel

Copper price down to Rs 695/Kg Aluminum price downward trend continue

800000 715421 734866 300000

Copper (Rs/ MT) Aluminium (Rs/ MT) 245589
700000 250000
600000 694571 197338
461392 200000
500000
383479 177344
400000 150000 120476
407017
300000
100000
113873
200000
50000
100000
0 0
1Q15
3Q15
1Q16

1Q17
3Q17
1Q18
3Q18
1Q19
3Q19

3Q20
1Q21
3Q21
1Q22
3Q22
1Q23
3Q23
1Q24

1Q13
3Q13

3Q14
1Q15
3Q15
1Q16
3Q16

3Q17
1Q18
3Q18
1Q19
3Q19

3Q20
1Q21
3Q21
1Q22
3Q22
1Q23
3Q23
1Q24
3Q16

1Q20

1Q14

1Q17

1Q20
Source: Bloomberg, PL Source: Bloomberg, PL

Polypropylene prices down 23.9%YoY in Q1FY24 Avg INR depreciated by 6.4% YoY in Q1FY24

Polypropylene (Rs/MT) USD INR

1826

82.5
82.2
1600

1541

2000 90.0 75.2

1403
1398
1377

70.171.2
1340

1328
1314

80.0
1265

62.065.9
1215

1002
1157

1130

70.0
1077
1033

1500 54.2
60.0 49.8
940

948

44.9
840

50.0
1000
40.0
30.0
500 20.0
10.0
0 0.0
1Q10
1Q11
1Q12
1Q13
1Q14
1Q15
1Q16

1Q18
1Q19
1Q20
1Q21
1Q22
1Q23
1Q23
1Q24
1Q09

1Q17

1Q08
1Q09
1Q10
1Q11
1Q12
1Q13

1Q15
1Q16
1Q17
1Q18
1Q19
1Q20
1Q21
1Q22
1Q23
1Q24
1Q14

Source: Bloomberg, PL Source: Bloomberg, PL

Gross margin expected 200bps improvement over FY23-26E

Gross Profit (Rs mn) Gross Margin (RHS)

25,000 22.3% 23%

21.7%
21.1% 22%
20,000
20.3% 21%
20.0%
19.5% 20%
15,000
18.3% 19%
17.7%
10,000 18%
17%
5,000
16%
- 15%
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

September 20, 2023 28

 R R Kabel

EBITDA and PAT CAGR of 38.8% and 44.3% over FY23-26

While majority of the revenue comes from B2C biz which offers higher margins, RR
Kabel’s margins remained lower compared to other listed players majorly due to
significant impact on the gross margin profile for the company. Going ahead,
company’s key focus remains on improving efficiency & utilization levels and
improving product profile that can drive margin expansion. We estimate EBITDA
CAGR of 38.8% over FY23-26, led by improving revenue mix based on rising
contribution from cable in export market and various cost efficiency measures. We
estimate margin improvement by 300bps and PAT CAGR of 44.3% over FY23-26E,
led by improving margins and lower interest burden.

 RR Kabel – Export accounts ~23% revenue: Export accounts for ~23%

of revenue which is mostly wire export, where company is expected to
improve product mix towards cable, which is better margin product in
export market against wire. The company is increasing its cable capacity
to 2.4x existing capacity. We believe that change in exports product mix
will improve margin for company.

 Reduction in advertisement & promotion expenses as %sales: With

the scale/increase in revenue, company is expected to reduce its adv.
expenses (1.5% sales in FY23) as % sales in coming years (est. to reach
1.1% sales by FY26).

 Fixed cost with scale as %sales is expected to reduce: The company

has aggressively increased in distribution/electrician network in last 3
years to drive growth in coming years. It has also invested in opportunity
states (12states with <5% market share) to reap further benefits.

 Capacity increase in cable business will reduce cost of production:

The company is increasing its cable capacity by 2.4x existing capacity,
which will reduce cost of production and also bring price improvement.
Currently, company is selling its cable at discount to peers because of its
capacity constraint and delivery time of ~30days thus giving discounted
pricing to customers which will addressed post capacity expansion.

 FMEG losses to minimize: We are expecting FMEG losses to minimise

in the coming years on account of scaling up of FMEG business and
integration of acquired assets.

September 20, 2023 29

 R R Kabel

EBITDA margin to expand 300bps over FY23-26E PAT to grow at a CAGR of 44.3% over FY23-26E

EBITDA (Rs bn) Margin % Adj. PAT (Rs bn) YoY gr % (RHS)

10.0 9% 10% 6.0 7%

8% 8% 6%
5% 6%
8.0 7% 7% 8% 5.0 5% 5%
5%
6% 5%
4.0
6.0 6% 3% 4%
3.0
4.0 4% 3%
2.0
2%
2.0 2%

1.4

2.1

1.9

3.1

4.5

5.7
2.3

3.0

3.2

4.9

7.0

8.6
1.0 1%
- 0% - 0%
FY21 FY22 FY23 FY24E FY25E FY26E FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Peers comparison - EBITDA margins

Company FY21 FY22 FY23 FY21-23
(Rs bn) EBITDA Margin EBITDA Margin EBITDA Margin CAGR
RR Kabel 2.5 9.2% 3.5 7.9% 3.6 6.3% 19.0%
Finolex Cables 4.5 15.7% 5.0 13.0% 6.3 13.6% 18.4%
Polycab 12.3 13.8% 13.6 11.0% 19.9 13.9% 27.0%
KEI Ind 4.8 11.3% 6.0 10.5% 7.3 10.6% 24.2%
Havells 17.6 16.5% 19.1 13.5% 17.8 10.4% 0.5%
Bajaj Electricals 4.2 9.1% 2.9 6.0% 4.3 7.9% 1.2%
Crompton 8.0 16.3% 8.2 14.9% 8.4 12.1% 2.5%
V Guard 3.3 12.1% 3.5 10.0% 3.4 8.1% 0.5%
Source: Company, PL; Note: EBITDA including other income.

September 20, 2023 30

 R R Kabel

Valuations: Superior growth can re-rate the stock

RR Kabel is well placed to capitalize on upcoming opportunities in wires & cables

segment given 1) well-structured capacity expansion plans, 2) increase in
dealers/distribution network, and 3) establishment of distribution led export
business. However, it has grown its FMEG portfolio inorganically to minimize losses
in coming years while transitioning towards premium market. We estimate
Revenue/EBITDA/PAT CAGR of 20.7%/38.8%/44.3% over FY23-26E led by 1)
improving business mix 2) operating leverage & cost optimizing initiatives 3)
investments in brand building and 4) increasing distribution reach.

We initiate coverage on RR Kabel with a ‘BUY’ rating and TP of Rs1407 valuing at

35x FY25 earnings. Peers in W&C segment such as Polycab / Finolex / KEI trade
at 41x/22x/32x on FY25 earnings, considering 22.2%/24.2%/24.6% earings CAGR
over FY23-25.

Valuation Matrix
Revenue growth (%) PAT growth (%) RoE (%) P/E (x)
Name
FY23 FY24E FY25E FY23 FY24E FY25E FY23 FY24E FY25E FY23 FY24E FY25E
Finolex Cables 18.9 17.2 15.9 -15.8 24.5 18.3 12.2 15.4 16.2 33.9 27.1 22.0
KEI 20.7 19.2 16.8 26.4 30.2 19.3 20.2 21.6 21.2 50.2 38.5 32.3
Polycab 14.9 23.1 15.6 39.2 30.0 14.9 20.9 22.4 21.3 60.9 46.8 40.7
RR Kabel 27.7 21.3 25.0 -11.3 63.3 46.3 11.6 16.2 19.2 52.2 37.7 25.8
Source: Company, PL

September 20, 2023 31

 R R Kabel

Story in Charts

RoCE to improve to ~26% by FY26E RoE to improve over FY23-26

RoCE % RoE %

30.0 26.9 25.0

25.7
24.0 19.2 19.8
25.0 18.8
20.0
19.6 16.2
20.0 14.6
15.5 15.0
13.2 13.0 14.2 11.0 11.6 11.6
15.0
10.0
10.0
5.0 5.0

0.0 0.0
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Free cash flow to increase with scale Gross Debt to Equity improve steadily

FCF (Rs bn) Gross Debt : Equity (x)

8.0 7.2 0.6

0.5 0.5
6.0 5.1 5.3 0.5 0.4 0.4
4.4 0.4
0.4
4.0 3.2
2.2 0.3
0.2
2.0
0.6 0.2 0.1
0.0 0.1
0.1
-2.0 -1.1 0.0
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Working capital days to improve steadily Peers - Working capital days

Working Capital Days RR Kabel KEI Polycab Finolex Cable

120 113 140

92 120 113
100 90 88
100 93 90 88
80 66 70 70 70
80 66 70 70
60
60
40
40
20 20
- 0
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY19 FY20 FY21 FY22 FY23 FY24E FY25E

Source: Company, Company, PL Source: Company, Company, PL

September 20, 2023 32

 R R Kabel

Key Risks
Volatility in prices of raw materials

The company’s major RM is copper, aluminum, PVC etc. RR Kabel has witnessed
a surge in key RM prices, and there is no surety on its ability to pass on cost
increase to consumers. There are chances of consumers cancelling/refraining from
orders when RM prices spike.

Fluctuation in currency exchange rate

Fluctuation in rupee-dollar exchange rate also poses a key challenge to the W&C
industry. The average rupee-dollar exchange rate was Rs 74 in CY21, which had
increased to Rs 83 in Oct-22. The company imports raw materials such as
aluminum, insulation materials because of economies of cost and quality, which
when exposed to exchange rate fluctuation, may result in increase in overall cost,
thereby impacting the margins.

Concentration risk in export market

RR Kabel faces a concentration risk, due to its heavy reliance on small number of
distributors for its overseas markets. A significant portion of its export revenue,
around 89.8%, is generated by its top 10 overseas distributors.

September 20, 2023 33

 R R Kabel

Annexure:
Board of Directors & KMP

Key Management Posts held by family members

Managemen
Name
t Role
Family Member Representation on
Board of Directors
Tribhuvanprasad Rameshwarlal Kabra Executive Chairman Yes
Shreegopal Rameshwarlal Kabra MD Yes
Mahendrakumar Rameshwarlal Kabra Joint MD Yes
Other Board of Directors
Mitesh Daga Non-Executive Nominee Director
Bhagwat Singh Babel Independent Director
Ramesh Chandak Independent Director
Vipul Sabharwal Independent Director
Jyoti Davar Independent Director
Source: Company, PL

KMP & Senior management team

KMP Name Designation
Tribhuvanprasad Rameshwarlal Kabra Executive Chairman
Shreegopal Rameshwarlal Kabra MD
Mahendrakumar Rameshwarlal Kabra Joint MD
Rajesh Babu Jain CFO
Dinesh Aggarwal CEO
Himanshu Navinchandra Parmar CS
Senior Management Personnel Designation
Sanjay Narnarayan Taparia CEO of International Biz
Satishkumar Anandilal Agarwal Chief Strategy Officer
Shishir Sharma Chief Sales Officer
Vinod Parur Chief Human Resource Officer
Vivek Abrol CEO, Consumer Biz
Source: Company, PL

September 20, 2023 34

 R R Kabel

Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m)
Y/e March FY23 FY24E FY25E FY26E Y/e March FY23 FY24E FY25E FY26E

Net Revenues 55,992 67,903 84,886 98,567 Non-Current Assets

YoY gr. (%) 27.7 21.3 25.0 16.1
Cost of Goods Sold 9,617 10,071 11,111 11,111 Gross Block 7,753 10,353 12,453 14,553
Gross Profit 10,235 13,212 16,941 20,009 Tangibles 7,589 10,139 12,189 14,239
Margin (%) 18.3 19.5 20.0 20.3 Intangibles 164 214 264 314
Employee Cost 2,642 3,204 3,905 4,436
Other Expenses 4,370 5,093 6,070 6,954 Acc: Dep / Amortization 2,581 3,034 3,841 4,806
Tangibles 2,483 2,898 3,657 4,565
EBITDA 3,223 4,915 6,966 8,620 Intangibles 99 136 184 242
YoY gr. (%) 6.3 52.5 41.7 23.7
Margin (%) 5.8 7.2 8.2 8.7 Net fixed assets 5,172 7,319 8,611 9,746
Tangibles 5,107 7,242 8,532 9,675
Depreciation and Amortization 596 728 910 1,073 Intangibles 65 77 79 72

EBIT 2,627 4,187 6,056 7,546 Capital Work In Progress 436 436 436 436
Margin (%) 4.7 6.2 7.1 7.7 Goodwill - - - -
Non-Current Investments 196 196 196 196
Net Interest 421 434 397 355 Net Deferred tax assets - - - -
Other Income 344 390 400 425 Other Non-Current Assets 1,071 1,150 1,263 1,354

Profit Before Tax 2,550 4,143 6,060 7,616 Current Assets

Margin (%) 4.6 6.1 7.1 7.7 Investments 2,849 2,849 2,349 2,849
Inventories 8,602 10,604 13,256 15,393
Total Tax 661 1,043 1,525 1,917 Trade receivables 5,919 6,883 8,605 9,992
Effective tax rate (%) 25.9 25.2 25.2 25.2 Cash & Bank Balance 811 41 84 457
Other Current Assets 1,281 1,356 1,695 1,968
Profit after tax 1,889 3,100 4,534 5,699 Total Assets 26,336 30,835 36,496 42,392
Minority interest - - - -
Share Profit from Associate 9 - - - Equity
Equity Share Capital 478 564 564 564
Adjusted PAT 1,899 3,100 4,534 5,699 Other Equity 13,718 18,621 23,155 28,855
YoY gr. (%) (11.3) 63.3 46.3 25.7 Total Networth 14,197 19,185 23,719 29,419

Margin (%) 3.4 4.6 5.3 5.8

Extra Ord. Income / (Exp) Non-Current Liabilities
Long Term borrowings 269 169 169 99
Reported PAT 1,899 3,100 4,534 5,699 Provisions 705 855 1,069 1,241
YoY gr. (%) (11.3) 63.3 46.3 25.7 Other non current liabilities 149 149 149 149
Margin (%) 3.4 4.6 5.3 5.8
Current Liabilities
Other Comprehensive Income - - - - ST Debt / Current of LT Debt 4,890 3,890 3,190 1,990
Total Comprehensive Income 1,899 3,100 4,534 5,699 Trade payables 4,401 4,495 5,585 6,457
Equity Shares O/s (m) 96 113 113 113 Other current liabilities 1,726 2,093 2,617 3,038
EPS (Rs) 19.8 27.5 40.2 50.5 Total Equity & Liabilities 26,336 30,835 36,496 42,392
Source: Company Data, PL Research Source: Company Data, PL Research

September 20, 2023 35

 R R Kabel

Cash Flow (Rs m) Key Financial Metrics

Y/e March FY23 FY24E FY25E FY26E Year
Y/e March FY23 FY24E FY25E FY26E

PBT 2,560 4,143 6,060 7,616 Per Share(Rs)

Add. Depreciation 596 728 910 1,073 EPS 19.8 27.5 40.2 50.5
Add. Interest 421 434 397 355 CEPS 26.1 33.9 48.3 60.0
Less Financial Other Income (505) (435) (464) (476) BVPS 148.4 170.1 210.2 260.8
Add. Other - - - - FCF 15.1 (14.6) 0.4 17.0
Op. profit before WC changes 3,072 4,870 6,902 8,568 DPS - - - -
Net Changes-WC 819 (2,603) (3,131) (2,528) Return Ratio(%)
Direct tax (661) (1,043) (1,525) (1,917) RoCE 16.0 21.5 25.7 27.2
Net cash from Op. activities 3,230 1,224 2,246 4,124 ROIC 17.7 22.7 26.6 29.0
Capital expenditures (1,790) (2,875) (2,202) (2,208) RoE 14.2 18.6 21.1 21.5
Interest / Dividend Income 344 390 400 425 Balance Sheet
Others (1,450) 500 500 (900) Net Debt : Equity (x) 0.1 0.1 0.0 (0.0)
Net Cash from Invt. activities (2,896) (1,985) (1,302) (2,683) Net Working Capital (Days) 66 70 70 70
Issue of share cap. / premium 239 86 - - Valuation(x)
Debt changes 479 (963) (504) (1,112) PER 52.2 37.7 25.8 20.5
Dividend paid - - - - P/B 7.0 6.1 4.9 4.0
Interest paid (421) (434) (397) (355) P/CEPS 39.7 30.5 21.4 17.2
Others - - - - EV/EBITDA 31.2 24.0 16.9 13.4
Net cash from Fin. activities 297 (1,311) (901) (1,467) EV/Sales 1.8 1.7 1.4 1.2
Net change in cash 631 (2,071) 43 (27) Dividend Yield (%) - - - -
Free Cash Flow 1,440 (1,651) 44 1,915 Source: Company Data, PL Research
Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e March Q4FY23 Q1FY24
Net Revenue 15,165 15,973
YoY gr. (%) 8.5 29.2
Raw Material Expenses 12,238 13,055
Gross Profit 2,927 2,918
Margin (%) 19.3 18.3
EBITDA 1,004 1,129
YoY gr. (%) 30.4 182.5
Margin (%) 6.6 7.1
Depreciation / Depletion 137 161
EBIT 867 969
Margin (%) 5.7 6.1
Net Interest 129 144
Other Income 138 163
Profit before Tax 876 987
Margin (%) 5.8 6.2
Total Tax 230 250
Effective Tax Rate (%) 26.3 25.4
Profit after Tax 646 737
Minority Interest - -
Share Profit from Associates 9.4 6.7
Adjusted PAT 656 743
YoY gr. (%) 7.8 309.8
Margin (%) 4.3 4.7
Extra Ord. Income / (Exp) - -
Reported PAT 656 743
YoY gr. (%) 7.8 309.8
Margin (%) 4.3 4.7
Other Comprehensive Income 0 295
Total Comprehensive Income 656 1039
Avg. Shares O/S (m) 111 111
EPS (Rs.) 5.9 6.7
Source: Company Data, PL Research

September 20, 2023 36

 R R Kabel

Notes

September 20, 2023 37

 R R Kabel

Notes

September 20, 2023 38

 R R Kabel

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)

1 Astral Ltd. Hold 1,955 1,974

2 Bajaj Electricals Accumulate 1,337 1,220

3 Century Plyboard (I) BUY 800 629

4 Cera Sanitaryware Hold 8,224 7,917

5 Crompton Greaves Consumer Electricals BUY 369 309

6 Finolex Industries Accumulate 197 184

7 Greenpanel Industries BUY 459 341

8 Havells India BUY 1,460 1,348

9 Kajaria Ceramics Hold 1,363 1,393

10 KEI Industries Hold 2,319 2,270

11 Polycab India Accumulate 4,760 4,309

12 Supreme Industries Hold 3,377 3,382

13 Voltas Hold 831 829

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : >15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

September 20, 2023 39

 R R Kabel

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September 20, 2023 Amnish 40

Digitally signed by Amnish Aggarwal
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Date: 2023.09.20 09:12:41 +05'30'