Dolat Capital recommended accumulate rating on KEI Industries with a target price of Rs 360 in its research report dated June 02, 2020.
Dolat Capital's research report on KEI Industries
KEI Industries (KEI) results were below our estimates, due to sales lost in dealer segment in last 10 days of lockdown. Usually March month is a peak month for sales through dealer/distributor network. Cables division is expected to bounce back in H2FY21 considering the government push for rural electrification and metro transport. However, wires segment may see slow recovery due to slowdown in real estate sector. KEI’s focus has been on various brand building exercises and expanding its dealer network, as this sales channel offers higher brand stickiness as well as better margins and lower working capital requirement. However, in H1FY21 they will not spend much on brand building exercises. They expect dealer segment to grow by 8-10% as against a growth of 13% in FY20. Recovery will be seen coming sooner from Tier 2, Tier 3 cities. Distribution expansion will propel growth in the retail segment.
The improvement in the balance sheet is a result of the strong macro demand and the optimal product mix. We recommend Accumulate, with a target price of Rs 360. (10x FY22E).
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