Prabhudas Lilladher is bullish on KEI Industries has recommended buy rating on the stock with a target price of Rs 383 in its research report dated June 02, 2020.
Prabhudas Lilladher's research report on KEI Industries
KEI Industries (KEII) witnessed muted growth for the quarter. Revenues were flat at Rs 12,585m while EBITDA and PBT de-grew 12.3%/9.7% YoY to Rs 1,206m/ Rs816m respectively. EBITDA margins declined by 130 bps YoY as sub-contractor costs rose sharply. FY20, revenues/EBITDA/PBT grew 15.6%/ 12.2%/ 17% to Rs 48,843m/Rs 4,960m/ Rs 3267m. Cable volumes grew 18%. During Q4, Institutional cable revenues were up ~23.4% YoY and 30% for FY20. Sales through dealer network were down 20.7% YoY to Rs 3.2bn due to Covid lockdown but total active dealers increased from 1600 in Q3 to 1650 in Q4. For the year as a whole B2C revenues were flat and accounted for 29% of revenues. Exports nearly doubled YoY to Rs 2,260m in Q4 & grew by 76.8% during FY20. Order book stands at ~Rs 32.4bn providing revenue visibility for 3 quarters. KEII finished raising Rs 5bn during Q4 of which Rs 2.9bn was utilized to repay debt.
At 10.7x FY22E EPS, although valuations don't appear very cheap, but given that the company has sufficient capacities to generate revenues of Rs 56bn and has a strong execution record, pre qualifications most all leading institutional clients, pan India distribution network, sufficient cash reserves to fund greenfield capex in case demand picks up sooner, stable debt levels at Rs 3bn levels and fairly stable margins(~10%), we feel the company is well poised to capture growth when the cycle turns and hence maintain BUY with a TP of Rs 383 (13.3x weighted target multiple)
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