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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