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2025-10-17 04:00:13 pm | Source: Prabhudas Lilladher Ltd
Buy KEI Industries Ltd for the Target Rs. 4,926 By Prabhudas Liladhar Capital Ltd
Buy KEI Industries Ltd for the Target Rs. 4,926 By Prabhudas Liladhar Capital Ltd

Sanand ramp-up delayed, growth outlook intact

Quick Pointers:

* Reported volume growth of 15% in Q2FY26

* Guided for 20%+ revenue growth in FY26 and 20%+ CAGR from FY27

KEII has reported W&C revenue growth of 22.5% driven by strong export demand, which offset the moderation in domestic demand. KEII has guided for revenue growth to exceed 20% in FY26, with a sustained CAGR of over 20% from FY27. Growth is expected to be driven by strong traction across emerging sectors such as data centers, renewables, real estate, and infrastructure projects. Commencement of the 1 st phase of the new facility, expected by Nov’25, with 50% capacity utilization, will further support growth; full ramp-up is anticipated by FY27. The company aims to improve its EBITDA margin by 100-150bps once Sanand plant becomes fully operational. KEII reported strong revenue growth in EHV cables (+83.0% YoY), LT cables (+33.5% YoY), and housing/winding wires (+27.3% YoY) in Q2FY26. Exports saw a significant increase of 93.2%, while institutional cable exports surged by 116.6%. We tweak our earnings estimates for FY27/FY28. We estimate revenue/EBITDA/PAT CAGR of 21.7%/23.2%/22.6% for FY25-28E. Maintain ‘BUY’ at TP of Rs4,926 (earlier Rs4,946), valuing at 40x FY28 earnings.

Revenue grows by 19.4%, PAT up by 31.5%: Revenue grew by 19.4% YoY to Rs27.2bn (PLe: Rs28.4bn). W&C segment grew by 22.5% YoY to Rs26.3bn, while SS wires declined by 10.6% YoY to Rs539mn, and EPC declined by 22.6% YoY to Rs1.0bn. EBITDA grew by 19.8% YoY to Rs2.7bn (PLe: Rs 2.9bn), and EBITDA margin expanded by 10bps YoY to 9.9% (PLe: 10.1%). EBIT margin of W&C expanded by 50bps YoY to 10.9%, EPC contracted by 420bps YoY to 5.1%, and SS wires expanded by 350bps to 8.2%. PAT stood at Rs2.0bn (+31.5% YoY, PLe: Rs2.1bn). Domestic institutional W&C sales grew by 3.1% YoY, whereas institutional exports surged by 116.6% YoY. Dealer/distributor driven sales grew by 17.3%. Dealer count stood at 2,343 vs 2,094 in Q1FY26. Pending order book stood at Rs38.2bn. Net cash stood at Rs13.8bn.

Concall highlights: 1) The company has guided for revenue growth of over 20% in FY26 and a sustained CAGR of 20%+ from FY27, along with EBITDA margin expansion of 100–150bps as the Sanand plant becomes fully operational. 2) W&C volume grew 15% YoY in Q2FY26. 3) Sanand plant has been delayed by ~4months due contractor side challenges and labor shortage, while the 2 nd phase is delayed by ~9months due to complexities faced in the construction of vertical tower. 4) The plant is expected to generate revenue of ~Rs60bn, of which ~Rs1.2bn will be contributed by the EHV segment and Rs4.8bn from the low and medium voltage cables. 5) Pending order book, including EPC, stood at Rs38.2bn: EPC at Rs4.8bn, EHV at Rs6.4bn, domestic cables at Rs20.7bn, and export cables at Rs6.4bn. 6) Capacity utilization for Q2FY25 stood at 78% in cables, 65% in housing wires, 85% in SS wires, and 46% in communication cables. 7) Export contribution to total revenue is expected to increase to 18% in FY27. 8) The company derived 54.1% of revenue from dealers/distributors Q2FY26. 9) 25% of total exports in H1FY26 came from newer geographies.

 

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