Prabhudas Lilladher's research report on KEI Industries
We have revised upward our earnings estimate by 5.9%/4.8%/1.1% for FY23/FY24/FY25. Given strong demand outlook despite inflationary environment, management maintained its revenue CAGR at 17-18% and expects margins of 11%+ in the near term. We are positive on the company for long term given 1) focus on diversifying product portfolio and de-risking business (retail accounts for ~45%) 2) focus on scaling up distribution network (1,900 dealers, will grow by 10% p.a), 3) healthy balance sheet with net cash of Rs 2.1bn (including acceptances) by Dec-23 and 4) 17-18% growth in housing wires with improvement in real estate sector.
KEII aims to achieve Rs 100bn in revenue by FY26 with an EBITDA margin target of 11-12%. We estimate Sales/EBITDA/PAT CAGR of 16.7%/20.8%/23.3% over FY22-25E then value the stock at 20x FY25 EPS and arrive at target price of Rs1,572 (Rs 1,555 earlier). Maintain ‘HOLD’ rating.