Buy KEI Industries Ltd for the Target Rs 5,961 by Prabhudas Liladhar Ltd
Healthy growth outlook, margin recovery remains crucial
KEII reported revenue growth of 38.5% YoY, driven by 46% growth in domestic W&C revenue, while export W&C revenue grew 7% YoY. Inventory increased due to the Sanand ramp-up and is expected to stabilize at current levels going forward. Management expects exports to accelerate, supported by a strong overseas order book, including INR9.9bn in export orders. Sanand capacity ramp-up remains gradual, with Phase 2 of the EHV and HT cable facility expected to commence commercial production by Mar’27. Management maintained its FY27 revenue growth guidance of 25%+ and EBITDA margin guidance of ~11%, with margins expected to improve towards 11-12% as Sanand utilization ramps up. Management reiterated its revenue growth target of 20% CAGR over the next 3-4 years. We tweak our earnings estimates by for FY28/FY29. We estimate revenue/EBITDA/PAT CAGR of 25.6%/29.4%/26.0% for FY26-29E. We maintain ‘BUY’ rating with revised TP of INR 5,961 (same as earlier), valuing at 35x Sep’28E earnings
Q2FY27 Financial performance:
Revenue grew by 38% YoY to INR37.8bn (PLe: INR34.6bn). W&C segment grew by 40% YoY to INR36bn, while SS wires grew by 16% YoY to IN 627mn, and EPC grew by 2.2% YoY to INR1.0bn. EBITDA grew by 40% YoY to INR3.8bn (PLe: INR3.8bn), and EBITDA margin remained flat YoY to 10% (PLe: 11.1%). EBIT margin of W&C expanded by 30bps YoY to 11.3%, EPC stood at -8.6% and SS wires expanded by 30bps to 8.5%. PAT grew by 29% to INR2.6bn (PLe: INR2.7bn).
Total exports grew by 7.1% YoY to INR4.6bn and while domestic W&C grew by 46% YoY to INR31.8bn. with management expecting growth to accelerate, supported by a strong overseas order book of INR9.9bn, of which ~50% is from the US, where demand remains strong across industrial and energy markets
Dealer/distributor driven sales grew by 50.46%. Dealer count stood at 2,146 vs. 2,128 in Q1FY27. Pending order book stood at INR51.8bn, and net debt, at INR3.1bn.
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SEBI Registration number is INH000000933
