Recomendation From Other Elect.Equip./Prod Sectors

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year

KEI Industries 

WIRED FOR ELECTRIFYING PERFORMANCE! 

HERE IS WHY
Robust revenue growth
Ongoing expansion
Expected growth in exports

 

KEI Industries Limited (KEI) is a cable manufacturing company engaged in the manufacture and supply of power and other industrial cables. The company is also engaged in engineering, procurement and construction (EPC) business. The company has a diversified business model with a strong presence in the domestic and international markets. It services retail and institutional segments catering to both private and public sector clients. The company operates through cables and turnkey projects segment. Its cables segment comprises of a range of cables such as extra high voltage (EHV), high tension (HT) and low tension (LT) power cables, control and instrumentation cables, winding wires, flexible wires, and house and stainless steel wires. 

In FY18, KEI incurred a capex of about Rs 50 crore on a greenfield project and added capacity in LT cables, which recently got operational. The company plans to incur additional capex of about Rs 60 crore in FY19 to add new HT cable line, which would likely be operational by the end of FY19. 

Its cable volume growth in FY18 stood at 18 per cent and it is expected to be maintained at similar levels. The company's EHV cables sales are expected to double in FY19 due to the strong position of its order book. In the turnkey projects segment, KEI's revenue stood at Rs 960 crore in FY18 and this is likely to be maintained for the next two financial years. 

The company’s current capacity utilisation stands at about 90 per cent. KEI's management expects exports segment revenue to grow at 10 to 15 per cent and retail segment at 30 per cent over FY18-20E. 

On the financial front, KEI posted a 29.6 per cent increase in its net sales to Rs 1,030.42 crore in Q4FY18 as compared to Rs 795 crore in Q4FY17. The company’s PBDT surged 41.77 per cent to Rs 71.61 crore in Q4FY18 on a year-on-year basis. Also, the net profit of the company increased by 56.7 per cent to Rs 49.56 crore in Q4FY18 as compared to Rs 31.62 crore in Q4FY17. The growth in profit can be attributed to strong growth in its topline and lower interest cost. 

On an annual basis, KEI posted a 23.32 per cent increase in its net sales to Rs 3,496.42 crore in FY18 as compared to Rs 2,835.20 crore in FY17. The PBDT of the company increased by over 46 per cent to Rs 236.39 crore in FY18 as against Rs 161.82 crore in FY17. The company posted an increase of 46.5 per cent in its net profit to Rs 144.56 crore in FY18 on a year-on-year basis. 

On the valuation front, the company has a price-to-earnings ratio of 21.98x. It has posted return on equity (ROE) of 23.49 per cent, return on capital employed (ROCE) of 24.70 per cent and has debt-to-equity ratio of 1.51x. Over the last three years, the company's revenue and PAT has grown at a CAGR of 18.1 per cent and 103.5 per cent, respectively. 

We recommend our reader-investors to BUY the stock.