ACL Cables’ leading export arm Cable Solutions’ Rs. 606 m IPO opens on 23 July

Cable Solutions Ltd., (CSLK), a leading specialised integrated cable manufacturer for a global clientele, is poised for significant growth as it prepares for its upcoming IPO opening on 23rd July. 

With an impressive 94% export revenue, CSLK excels in delivering full end-to-end customised engineering solutions tailored to meet specific client needs for high performance cables. Backed by its parent company, ACL Cables PLC, CSLK stands out in the global competitive landscape, uniquely positioned to capitalise on emerging market opportunities across the world while maintaining a commitment to innovation and quality.

CSLK’s unique value proposition lies in its ability to offer highly customised cable solutions tailored to specific client needs across various industries. As Sri Lanka’s leading specialised integrated cable manufacturer, CSLK’s robust export-oriented business model provides it with a distinctive edge in the global marketplace.

 Compared to the local peers offering standard products in this segment, CSLK specialises in developing customised, tailor-made solutions for a global clientele. Customers typically approach CSLK with specific engineering needs, and the company then develops or reverse engineers solutions, ensuring that each product meets specific client requirements. This bespoke approach not only sets CSLK apart but also allows the company to enjoy a superior margin profile. 

By tapping into high-value and high-growth sectors such as automotive, aerospace, electronics, and renewable energy, CSLK has successfully integrated itself into the global supply chains, positioning itself for robust growth in the coming years. This strategic positioning ensures that CSLK’s offerings are embedded in high-value applications, driving demand and customer loyalty.

CSLK’s in-house R&D team plays a crucial role in delivering value-added solutions. This team’s technical expertise and engineering capabilities enable CSLK to innovate continuously, addressing customer problems with new solutions that often become indispensable to the clients. This emphasis on innovation and problem-solving strengthens CSLK’s market position and drives continuous growth. The company has built superior in-house R&D and technical expertise since 2008 which acts as a significant competitive advantage in competing at a global scale.

CSLK’s products are integral to high-end, high-value growth sectors and this integration into the global electronic supply chain ensures high customer stickiness. For on-boarding, CSLK undergoes a rigorous approval process by its customers and their end customers, making it challenging to replace CSLK as a supplier once on-boarded to the supply chain. This high level of customer loyalty underscores the Company’s ability to maintain long-term relationships and secure repeat business. 

CSLK’s potential for growth is highlighted by its impressive revenue performance and strong export orientation. In FY2023, the Company generated revenues exceeding $ 9.3 million, with exports to 13 countries accounting for 94% of this revenue. CSLK’s highly customised and client driven products have returned 30%+ average Gross Profit Margin and 15%+ average Return on Equity over the past five years. CSLK’s diverse markets include major economies such as the USA, UK, Spain, Italy, Germany, Sweden, Switzerland, Russia, India, Australia, and New Zealand. This global footprint demonstrates CSLK’s ability to meet international standards, together with its resilience and adaptability in the competitive global market.

KPMG’s independent valuation report forecasts a revenue of $ 10.4 million and a net profit of $ 1.2 million for FY2025, while CSLK’s internal estimates, based on a solid order book and purchasing outlook, project a net profit of $ 1.4 million. With a recorded revenue of $ 1.6 million in the first two months of FY2025 and a net profit margin of $ 273k, CSLK is on track to exceed its financial targets, showcasing a promising trajectory for prospective investors. The 2-month EPS of FY2025 is LKR 0.18 per share. 

The offer price is set at Rs. 7.50 per share, with applications currently being accepted. The IPO comprises a total of 80,786,600 ordinary voting shares, including an offer for subscription of 14,666,600 new shares and an offer for sale of 66,120,000 existing shares. The IPO proceeds from offer for subscription will be used to invest Rs. 90 million in new extrusion equipment, significantly enhancing production capacity from 150 meters per minute to 600 meters per minute. An additional Rs. 20 million will be allocated for working capital.

Valuation by independent valuer KPMG, based on a discounted cash flow (DCF) analysis, places the share value at Rs. 10.30, enabling an IPO discount of 27%. The Company’s Price to Earnings multiple ranges between 8 to 9 times based on the net profit range of $ 1.2 - 1.4 million which is at a 27-35% discount to median regional peer multiple of 12 times and the five-year average peer multiple of 12 times of comparable export counters in Colombo Stock Exchange. The IPO provides an attractive entry point for potential investors. 

As CSLK embarks on this exciting new chapter with its IPO, it continues to lead the industry with innovation, quality, and a customer-centric approach. Investors looking for a high-growth opportunity in the specialiSed manufacturing sector will find CSLK’s offering compelling and strategically sound.