Buy KEI Industries Ltd For Target Rs.4,500 By Geojit Financial Services Ltd
Healthy demand drives steady performance
KEI Industries Ltd is a leading manufacturer of wires and cables, with a diversified portfolio spanning house wires, power cables, specialty cables, stainless steel wires, and EPC solutions for power infrastructure projects.
* Revenue grew 38.5% YoY to Rs. 3,776cr in Q2FY27, primarily because of strong growth across domestic wires and cables and traction in dealer-distributor channels.
* Domestic wires and cables revenue increased 45.8% YoY to Rs. 3,184cr, reflecting strong underlying demand and improved operational performance.
* Wires and cables contributed 96.4% of quarterly revenue, while dealer-distributor sales, which rose 50.5% YoY, accounted for 58.8% of sales, highlighting the strength of the company’s distribution network.
* EBITDA rose 39.8% YoY to Rs. 377cr supported by robust revenue growth and operational improvements, while margin improved 10bps YoY to 10.0%.
* Profit after tax (PAT) grew 29.0% YoY to Rs. 262cr in Q2FY27, aided by strong revenue growth and healthy operating performance.
Outlook & Valuation
KEI Industries delivered a steady performance in Q2FY27, supported by healthy demand across domestic wires and cables, aided by infrastructure investments, power transmission spending, renewable energy projects and deeper retail penetration. The company is strengthening its market position through its extensive dealer network, increasing contribution from extra high voltage (EHV) cables and improving export opportunities. The management is confident of sustained growth, supported by strong demand and a healthy order backlog. Further, the ongoing ramp-up of the Sanand facility is expected to aid future growth and capacity expansion. We value KEI at 31x FY28E EPS, slightly below its historical average, to account for moderating earnings growth and commodity/execution risks, while recognising strong structural demand for cables. Accordingly, we upgrade the stock from HOLD to BUY rating and revise our target price to Rs. 4,500.
Key Concall Highlights
* KEI’s overall order book stood at approximately Rs. 5,185cr, of which those of wires and cables amounted to Rs. 4,927cr, while those EPC orders amounted to Rs. 258cr. Export order book stood near Rs. 991cr, with around half originating from the United States, where the management indicated particularly strong industrial and energy-related demand conditions.
* Phase-II commercial production of EHV and high tension (HT) cables at the Sanand facility is expected to commence by endMarch 2027, with sales expected to begin following the commissioning and approval process.
* The company incurred capex of Rs. 402cr during H1FY27, including Rs. 333cr for the Sanand project. The management said that capex is expected to be approximately Rs. 600cr annually over the next three to four fiscal years.
* The management expects revenue growth of over 25% in FY27, supported by strong demand across domestic and overseas markets.
* The management has reiterated annual EBITDA margin guidance of ~11%. It has also indicated that margin could move from 11% to 11.5% and subsequently towards 12% as the Sanand facility ramps up.
For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer
SEBI Registration Number: INH200000345
