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Performance above estimates; robust growth in C&W

* KEII’s 4QFY25 revenue increased by ~26% YoY to INR29.1b (~10% beat), due to higher-than-estimated revenue in C&W. EBITDA grew ~23% YoY to INR3.0b (~12% beat). OPM contracted 20bp YoY to 10.3% (+20bp vs. our estimate). PAT grew ~34% YoY to INR2.3b (~22% beat).

* Gross margin was down 60bp YoY (up 15bp QoQ) at ~23%. C&W sales through dealers rose 42% YoY during the quarter (~53% of total revenue in 4QFY25/FY25 vs. ~51% in 4QFY24/FY24). EHV sales declined 94% YoY/83% QoQ to INR145m. LT/HT cable revenue grew 39%/66% YoY, whereas HW/WW revenue grew ~38%. SSW revenue declined ~18% YoY. The order book stood at INR38.4b vs. INR38.8b as of Dec’24.

C&W revenue grew ~35% YoY, EBIT margin was flat YoY at ~11%

* KEII’s revenue/EBITDA/Adj. PAT stood at INR29.1b/INR3.0b/INR2.3b (+26%/ +23%/+34% YoY and +10%/+12%/+22% vs. our est.) in 4QFY25. OPM declined 20bp YoY to 10.3%. Depreciation rose 23% YoY, whereas interest costs declined ~16% YoY. Other income increased ~145% YoY.

* Segmental highlights: a) C&W revenue was up ~35% YoY at INR28b, EBIT rose ~36% YoY to INR3.1b, and EBIT margin remained flat YoY to 11%. b) EPC business revenue declined ~34% YoY to INR2.2b, EBIT declined 60% YoY to INR170m, and EBIT margin contracted 4.8pp YoY to 7.6%. c) Stainless steel wires (SSW) revenue declined 19% YoY to INR462m, EBIT increased 91% YoY to INR25m, and EBIT margin was up 3.1pp YoY at 5.4%.

* In FY25, revenue/EBITDA/PAT grew 20%/18%/20% YoY. EBITDA margin was flat YoY at ~10%. C&W revenue/EBIT grew 25%/29% YoY and EBIT margin increased 30bp YoY to 10.6%.

* The company’s gross debt stood at INR1.8b vs. INR1.3b as of Mar’24. Its cash & bank balance (including unutilized QIP proceeds of INR13.9b and acceptances) stood at INR19.15b vs. INR700m as of Mar’24. Net cash balance stood at INR14.9b vs. net debt of INR600m as of Mar’24. Operating cash outflow stood at INR322m v/s operating cash inflow INR6.1b in FY24 due to increase in working capital of INR8.23b in FY25. Capex stood at INR7.0b vs. INR4.0b in FY24 (including land purchase).

Valuation and view

* KEII’s 4QFY25 EBITDA was above our estimates. It reported robust revenue growth in the C&W segment, aided by capacity expansion during the year. Further, its active working dealer count increased to 2,082 vs. 1,990/2,060 in 4QFY24/3QFY25. The company has also seen steady improvement in its sales through dealers/distribution and export business.

* We have a Neutral rating on the stock. However, we will review our assumptions after the concall on 07th May’25 (Concall Link).

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