Company Update : KEI Industries by Motilal Oswal Financial Services Ltd
Performance above estimates; robust growth in C&W
* KEII’s 1QFY26 revenue increased ~26% YoY to INR25.9b (~9% beat), led by higher-than-estimated revenue in C&W (~12% beat). EBITDA grew ~20% YoY to INR2.6b (~12% beat). OPM dipped 45bp YoY to ~10% (+20bp vs. our estimates). PAT grew ~30% YoY to INR2.0b (~12% beat).
* Revenue from EHV/HT cables increased 56%/50% YoY, while revenue from LT cables/Housing wires rose 23%/30% YoY. Exports contributed 13.4% to total revenues vs. 7.9%/16% in 1Q/4QFY25. The order book rose 9% YoY/ 13% QoQ to INR39.2b.
* C&W sales through dealers rose 22% YoY during the quarter (~53% of total revenue vs. ~57% in 1QFY25). Further, its active working dealer count increased to 2,094 vs. 2,015/2,082 in 1QFY25/4QFY25.
C&W revenue rises ~32% YoY; EBIT margin dips 30bp YoY to 10.8%
* KEII’s revenue/EBITDA/Adj. PAT stood at INR25.9b/INR2.6b/INR2.0b (+26%/ +20%/+30% YoY and +9%/+12%/+12% vs. estimates) in 1QFY26. OPM declined 45bp YoY to 10.0%. Depreciation rose ~28% YoY, whereas interest costs increased marginally by ~2% YoY. Other income increased ~122% YoY.
* Segmental highlights: a) C&W revenue was up ~32% YoY at INR24.8b, EBIT rose ~29% YoY to INR2.7b, and EBIT margin declined 30bp YoY to 10.8%. b) EPC business revenue declined ~56% YoY to INR994m, EBIT declined 73% YoY to INR79m, and EBIT margin contracted 5.2pp YoY to 8.0%. c) Stainless steel wires (SSW) revenue declined ~3% YoY to INR521m, EBIT increased 312% YoY to INR42m, and EBIT margin surged 6.2pp YoY at 8.1%.
* The company’s gross debt stood at INR2.0b vs. INR1.8b as of Mar’25. Cash & bank balance (including unutilized QIP proceeds of INR11.1b) stood at INR17.0b vs. INR19.2b as of Mar’25. Net cash balance (ex-acceptances) stood at INR10.5b vs. INR14.9b as of Mar’25.
Valuation and view
* KEII’s 1QFY26 EBITDA was above our estimates. It reported robust revenue growth in the C&W segment; however, revenue declined in other segments. The C&W margin remained range-bound. The Sanand expansion project Phase 1 (LT/HT cables) will get commissioned by Sep’25, while EHV cable production will start by 1QFY27.
* We have a Neutral rating on the stock. However, we will review our assumptions after the concall on 22nd Jul’25 (Concall Link).
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