Anand Rathi
KEI Industries (Buy)
CMP: ₹319.1
Target: ₹441
KEI’s flattish revenue/PAT, though short of estimates, were quite encouraging. The healthy 9.6 per cent EBITDA margin was down 134 bps y-o-y, 101 bps q-o-q. Overall volumes were up 9 per cent y-o-y (18 per cent in FY20) with sales of institutional cable growing 23 per cent y-o-y while EPC/ retail sales declined 25 per cent/21 per cent y-o-y. EHV sales and exports continue to be robust. The longer NWC cycle (by 13 days to 79) was the result of an increase in inventories/debtors. Despite good collections over Apr-May (₹450 crore), we are cautious about FY21. We believe growth in the cable industry will continue while wires will see demand from smaller towns.
The strong order book (of ₹3,300 crore, including ₹730 crore of EHV and ₹1,640 crore exports), diversified customers and healthy balance sheet are positives. The ₹150 crore order for 400kVA cables (EHV) now places KEI among the world’s top manufacturer. The recent fund raising (₹500 crore) has helped repay debt and is good for future capex.
Valuation: We remain positive on KEI and retain our ‘Buy’ rating for its leading position in cables, healthy order book, diversified customers and better balance sheet.
Risks: Volatile raw material costs, delay in industrial capex.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.