IGI Logo

Earnings beat; margin expansion on track

* KEI Industries’ (KEII) 1QFY27 revenue grew ~23% YoY to INR31.9b (in line). EBITDA increased ~53% YoY to INR4.0b (~7% above, driven by a higher-thanestimated margin in the C&W segment). OPM improved 2.5pp YoY to 12.4% (+1.1pp vs. our estimate). PAT grew ~40% YoY to INR2.7b (in line).

* Management remained confident of delivering 20%+ medium-term growth, backed by robust demand across domestic and export markets. The Sanand facility is ramping up steadily, with utilization improving sequentially. This is estimated to contribute ~INR15-20b revenue in FY27 and ~INR40b in FY28 (with utilization to reach ~70-75%). It also highlighted disciplined capital allocation with INR6.0-7.0b annual capex planned over the next 3-4 years, including the new Salarpur greenfield plant, to support future LV/MV cable expansion and long-term growth. It guided a sustainable OPM of ~11–12%, supported by operating leverage, favorable product mix, stronger retail mix, and better margin export orders.

* We largely maintain our earnings estimates for FY27/FY28. We value KEII at 45x FY28E EPS to arrive at our TP of INR6,630. Reiterate BUY.

C&W revenue up ~25% YoY; EBIT margin expands 2.8pp YoY to 13.6%

* KEII’s revenue/EBITDA/Adj. PAT stood at INR31.9b/INR4.0b/INR2.7b (+23%/ +53%/+40% YoY and -3%/+7%/+3% vs. our estimates) in 1QFY27. OPM expanded 2.5pp YoY to 12.4%. Depreciation/interest costs rose ~44%/22% YoY. Other income declined ~51% YoY for the quarter.

* Segmental highlights:

a) C&W revenue was up ~25% YoY at INR30.9b, EBIT rose ~57% YoY to INR4.2b, and EBIT margin increased 2.8pp YoY to 13.6%;

b) EPC business revenue increased ~32% YoY to INR1.3b, segment loss stood at INR51m vs. profit of INR79m/INR47m in 1QFY26/4QFY26;

c) Stainless steel wires (SSW) revenue increased ~3% YoY to INR536m, EBIT increased ~16% YoY to INR49m, and EBIT margin improved 1.1pp YoY at 9.2%.

* Cash and bank balance (net of acceptances) stood at INR2.85b vs. INR5.92b as of Mar’26.

Valuation and view

* KEII’s 1QFY27 performance was above our estimates, driven by higher-thanestimated margins in C&W. We remain positive on KEII, supported by strong execution, industry tailwinds, and an improving margin profile. Management is confident of sustaining ~11–12% OPM (vs. the earlier threshold of ~10-11% over FY22-25). Additionally, the planned INR6.0-7.0b annual capex over the next 3-4 years, including the Salarpur greenfield expansion, positions it well to capture the structural growth opportunity in the C&W industry.

* We estimate KEII’s total revenue CAGR at ~21% over FY26-28, led by ~23% growth in the C&W segment and ~7% growth in the SSW segment. However, the EPC revenue is estimated to decline ~8% annually. We project its EBITDA/PAT CAGR of ~27%/23% over FY26-28. We estimate OPM at ~11%/12% over FY27/FY28. The stock is trading at 47x/37x on FY27E/FY28E EPS. We value KEII at 45x FY28E EPS to arrive at our TP of INR6,630. Reiterate BUY.

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412