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In-line performance; OPM below our estimate

* KEII’s 2QFY26 revenue grew ~19% YoY to INR27.3b (in line). EBITDA rose ~20% YoY to INR2.7b (in line). OPM was flat YoY at ~10% (-50bp below our est.). PAT grew ~31% YoY to INR2.0b (in line). There has been a delay in the commissioning of the Sanand Project, with Phase-I expected in Nov’25 (earlier in Sep’25) and EHC to be commissioned by 4QFY27 (earlier in 1HFY27).

* Revenue mix of different cables in overall cables revenue: LT/HT/EHV cables stood at ~71%/19%/10% vs. ~63%/30%/7% in 2QFY25 and ~63%/29%/8% in 1QFY26. Exports contributed ~16% to total revenues vs. ~9%/13% in 2QFY25/1QFY26. The order book declined ~1% YoY/2% QoQ to INR38.2b.

* C&W sales through dealers rose ~17% YoY during the quarter (~54% of total revenue vs. ~55% in 1QFY25). Further, its active working dealer count increased to 2,343 vs. 2,038/2,094 in 2QFY25/1QFY26.

C&W revenue rises ~22% YoY and EBIT margin up 50bp YoY to 10.9%

* KEII’s revenue/EBITDA/Adj. PAT stood at INR27.3b/INR2.7b/INR2.0b (+19%/ +20%/+31% YoY and -1%/-5%/-3% vs. our estimate) in 2QFY26. OPM was flat YoY to ~10%. Depreciation/interest cost increased by ~24%/6% YoY. Other income increased ~232% YoY.

* Segmental highlights: a) C&W revenue was up ~22% YoY at INR26.3b, EBIT rose ~28% YoY to INR2.9b, and EBIT margin increased 50bp YoY to 10.9%. b) EPC business revenue declined ~23% YoY to INR1.0b, EBIT declined 58% YoY to INR51m, and EBIT margin declined 4.2pp YoY to ~5.1%. c) Stainless steel wires (SSW) revenue declined ~11% YoY to INR539m, EBIT increased 55% YoY to INR44m, and EBIT margin increased 3.5pp YoY at 8.2%.

* In 1HFY26, revenue/EBITDA/PAT grew 22%/20%/31% YoY. EBITDA margin stood at 9.9% (down 20bp YoY). C&W revenue/EBIT was up 27%/29% YoY, and EBIT margin was flat YoY at 10.8% in 1HFY26. Operating cash inflow stood at INR3.8b vs. operating cash outflow at INR3.1b in 1HFY25. Capex stood at INR7.6b (including INR1.2b for land purchases) vs. INR3.1b. Net cash outflow stood at INR3.8b vs. INR6.2b in 1HFY25.

* The company’s gross debt stood at INR1.8b vs. INR2.0b as of Jun’25. Cash & bank balance (incl. unutilized QIP proceeds of INR7.7b) stood at INR15.6b vs. INR17.0b as of Jun’25. Net cash balance (ex-acceptances) stood at INR7.3b vs. INR10.5b in Jun’25 and INR14.9b in Mar’25.

Valuation and view

* KEII’s 2QFY26 performance was in line with our estimates. While the C&W segment delivered strong revenue growth, the performance in SSW and EPC was muted, with revenue declining YoY. We are structurally positive on the C&W sector given strong growth drivers. However, we seek management clarity on the impact, if any, of a delay in its greenfield expansion in Sanand.

* We have a BUY rating on the stock. However, we will review our assumptions after the concall on 16th Oct’25 (Concall Link).

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