Company Update : KEI Industries Ltd By Motilal Oswal Financial Services Ltd
EBITDA in line; miss on margins
* KEII’s 3QFY25 revenue increased by 20% YoY to INR24.7b (in line), as lowerthan-estimated EPC revenue was offset by higher-than-estimated revenue from C&W and SSW. EBITDA grew 12% YoY to INR2.4b (in line). OPM contracted 70bp YoY to 9.8% (70bp miss). PAT grew ~9% YoY to INR1.6b (6% miss).
* Gross margin was down 1.0pp YoY and flat QoQ (-1.0pp vs. our estimate) at 22.7%. C&W sales through dealers rose 31% YoY (53% revenue contribution vs. ~50% in 3QFY24). EHV sales declined 55% YoY/11% QoQ to INR840m. LT/HT cable revenue grew 30%/54% YoY, whereas HW, WW/SSW revenue grew ~25%/17% YoY. The order book stood at INR38.7b vs. INR38.3b as of Dec’23.
Revenue/EBITDA grew 20%/12% YoY; margin down 70bp YoY to 9.8%
* KEII’s revenue/EBITDA/Adj. PAT stood at INR24.7b/INR2.4b/INR1.6b (+20%/ +12%/+9% YoY and +3%/-3%/-6% vs. our est.) in 3QFY25. OPM was down 70bp YoY at 9.8%. Depreciation/interest costs rose 23%/31% YoY, while other income declined 4%.
* Segmental highlights: a) C&W revenue was up ~26% YoY at INR23.5b, EBIT rose ~20% YoY to INR2.4b, and EBIT margin declined 50bp YoY to 10.1%. b) EPC business revenue declined ~80% YoY to INR759m, EBIT declined 96% YoY to INR19m, and EBIT margin contracted 9.2pp YoY to 2.5%. c) Stainless steel wires (SSW) revenue grew 19% YoY to INR551m, EBIT fell 15% YoY to INR30m, and EBIT margin was down 2.3pp YoY at 5.5%.
* In 9MFY25, revenue/EBITDA/PAT grew 16%/14%/17% YoY. EBITDA margin was down 40bp YoY at 9.9%. C&W revenue/EBIT grew 21%/26% YoY and EBIT margin surged 40bp YoY to 10.5%. The company’s gross debt stood at INR2.7b vs. INR1.3b as of Mar’24. Its net cash balance (including unutilized QIP proceeds of INR17.5b and acceptances) stood at INR16.0b vs. net cash of INR600m as of Mar’24
Valuation and view
* KEII’s 3QFY25 EBITDA was in in line with our estimates. It reported strong revenue growth in the C&W segment. However, margin was below our estimate (C&W EBIT margin down 90bp vs. estimate). KEII continues to reduce its EPC exposure and increase sales through dealer/distribution. Further, its active working dealer count increased to 2,060 vs. 1,975/2,038 in 3QFY24/2QFY25.
* We have a BUY rating on the stock. However, we will review our assumptions after the concall on 22nd Jan’25 (Concall Link).
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
