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Universal Cables
Our verdict on Universal Cables isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →How durable is the business?
The company strengthened its technological moat by completing the modernization and technology upgradation of its EHV Power Cable Plant, increasing production capacity by 45%. (1 expanding)
“Post modernisation and technology upgradation the production capacity of Extra High Voltage (EHV) Power Cables has increased by approximately 45%”
The manufacturing segment saw a decline in revenue, primarily due to a planned shutdown of the Extra High Voltage (EHV) production lines for capacity upgrades. However, the Capacitors sub-segment recorded impressive growth of approximately 48% YoY. (1 contracting, 2 expanding across 1 engine)
“Sale of Manufacturing Products (Predominantly Electrical Cables and Capacitors): 187365.58 [Total Revenue from Contracts with Customers: 237984.08]”
See the full cited Business Model analysis of Universal Cables
What could break the thesis?
The risk remains high as management anticipates even greater volatility in copper prices for FY 2024-25, though they are actively pushing for price variation clauses in contracts. (2 intensifying, 1 high-severity)
“The cable industry continues to navigate a highly volatile raw material landscape, marked by sharp and unpredictable fluctuations in the prices of metals and polymers... While many customers have aligned with industry requests to include raw material price variation clauses in contracts, a substantial portion of the customer base continues to operate under firm price agreements.”
The risk has intensified as the JV recorded a steep decline and a loss of ₹ 1,336.62 lakhs for the year due to subdued global demand and unremunerative prices. (2 intensifying)
“Birla Furukawa Fibre Optics Private Limited, a joint venture company... recorded a decline in financial performance and incurred a loss during the year under review due to significant demand supply imbalances in optical fibre market. The downturn in financial performance during the year under review was primarily driven by global price erosion and persistent demand stagnation.”
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