Buy KEI Industries; target of Rs 2215: Sharekhan

Sharekhan's research report on KEI Industries

Q4FY2023 performance was in-line with estimates. Sales were driven by healthy volume growth of ~13% and ~20% in Q4FY2023 and FY2023, respectively. OPM jumped up by 83 bps y-o-y to 10.4% and net profit grew at a healthy pace of 19% y-o-y to Rs 138 crore. Management expects 16-17% revenue growth in FY2023, which would be supported by brownfield expansion in Silvassa plant. Thereafter, it aims to maintain a 17-18% revenue CAGR for the next couple of years. Management expects OPM to increase by 100-150 bps from current levels. KEI’s leading position in the W&C industry and strengthening retail business would help it leverage on the opportunities. Healthy balance sheet with net cash of ~Rs. 400 crore and improving working capital cycle are other key positives.

Outlook

We retain our Buy rating on KEI Industries Limited (KEI) with a revised PT of Rs. 2,215, factoring in a healthy demand outlook in the domestic market and capacity expansion across its product categories.

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