Buy KEI Industries; target of Rs 5100: Motilal Oswal

Motilal Oswal's research report on KEI Industries

KEI Industries (KEII)’s 2QFY25 earnings were below our estimate due to a lower-than-estimated margin in the Cables and Wires (C&W) segment led by RM cost volatility and lower EPC revenue. EBITDA was INR2.2b (est. INR2.5m), while OPM came in at ~10% (est. ~11%). PAT stood at INR1.5b (est. INR1.7b). Management indicated the volatility impact of RM costs will average out on a six-month basis, and it maintained its OPM guidance of 10.5-11.0% for FY25 (OPM was flat YoY at ~10% in 1HFY25). The decline in EPC revenue was due to heavy rainfalls across the country, due to which right-of-way (RoW) approvals were not available. KEII intends to remain a debt-free company and has obtained Board approvals for a fundraise of up to INR20b via QIP. We cut our EPS estimates for FY25-27 by ~3-6% as we factor in lower EPC revenue and reduced C&W EBIT margin by ~20bp. We estimate an EPS CAGR of ~20% over FY24-27. Outlook

We value KEII at 50x Sep’26E EPS to arrive at our TP of INR5,100 (vs. INR5,300). Reiterate BUY.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.