Emkay Global Financial's report on KEI Industries
KEI’s Q4 revenues were up 43.8% yoy and beat our estimates by 8% with ‘LT Cable’, ‘HT Cables’ and ‘EHV’ segments topping expectations by 7%/14%/21%. EPC revenue fell 18% yoy on a conscious scale-down. Overall volumes grew 19.7% yoy in Q4 and 21% in FY22. Due to RM inflation and the lag in price increase in the institutional business, GMs fell to a multi-year low of 22.2% (down 385bps yoy/101bps qoq). EBITDA was in line with estimates, with operating leverage limiting margin contraction. Management aims for healthy revenue growth of 18-20% in FY23. It also reiterated the focus on increasing retail sales and taking the retail contribution to 50% of total sales from 40% in FY22 in the next two years. FY23 should see continued improvement in WC cycle.
We have raised FY23-24 revenue estimates by 2-3%, but cut EBITDAM by 14-80bps. Maintain Buy with a revised Jun’24E TP of Rs1,350 (Rs1,290 earlier). Our target PE is derived using a two-stage DCF model.
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