KEI Industries Q1 Results Review - Strong, Inline; Robust Outlook Intact: Systematix

Systematix Research Report

KEI Industries Ltd.’s strong and inline Q1 (volume/revenue/Ebitda/PAT up 18%/16%/22% /24% YoY) was led by strong revenue in domestic institutional cables (up 20% YoY) and retail sales (up 29% YoY, 52.7% mix).

Unlike peer’s low growth, KEI’s House wires revenue increased 17% YoY at Rs 6.5 billion. Management retained its robust guidance of 15%+/20%+ revenue/PAT CAGR over five years. Exports (Q1 revenue down 37% YoY due to delay in shipment worth Rs 650 million) is now expected to grow 35% in FY25 (from 50% earlier, due to capacity constraint in HT cables).

It aims exports to contribute 15%/20% to FY25/FY26 revenue. Extra high voltage cables (Q1 revenue Rs 810 million, down 65% QoQ) will start clocking strong growth from FY27 after new capacity gets operational. Retail sales is expected to grow at 20%+ CAGR on addition of distributors in new markets and will drive Ebitda margin to 12% by FY27 (currently ~10.5%).

KEI’s ~Rs 20 billion capex plan over FY23-26 to build capacities across product lines will support future growth. We raise earnings estimates by ~4% mainly on better estimated margins. We now expect 18%/23%/ 26% CAGR in revenue/Ebitda/PAT over FY24-26E (FY19-24: 14%/14%/26% CAGR).

We remain sanguine about KEI’s promising growth prospects and maintain Hold rating with a higher target price of Rs 4,631 (45 times FY26E price/earning, earlier Rs 4,444). Strong operating cash flows (Rs 6 billion plus annually) and a robust 38% return on invested capital in FY26E will keep investor’s interest high in KEI and should sustain its premium valuation.

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