KEI Industries Q4FY17: Margins likely to improve further in coming quarters; Buy

Suhani Adilabadkar | June 28, 2017, midnight


KEI INDUSTRIES LTD reported yet another stellar performance for the fourth quarter FY17 with PAT growing 56% or 1.6 times YOY. PAT was reported at Rs. 316 Mn against Rs. 203 Mn corresponding period previous year. QOQ, PAT jumped 16% in the current March quarter. Revenue was seen at Rs 7950 Mn rising 17% YOY against Rs. 6809 Mn same period previous year. Revenue or Income from operations rose 4% sequentially. EBDITA was also seen on a firm footing YOY, rising in double digits at Rs. 809 Mn in Q4 FY17 against Rs. 702 Mn corresponding quarter previous year, rising 15% YOY. On quarterly basis, EBDITA increased 3% in the current Q4 FY17 and operating expenditure was relatively higher at 5% QOQ. Operating expenditure stood at Rs. 7291 Mn compared to Rs.6201 Mn corresponding quarter previous year, rising 18% YOY. Other Income trebled YOY and was reported at Rs. 73 Mn compared to Rs. 27 Mn in Q4 FY16. Though EBDITA Margin came under mild stress declining by 14 basis points YOY, Net Profit Margin expanded 100 bp on yearly basis. One basis point is 1/100th of a percentage. EBDITA & Net Profit Margin stood at 10.17% & 3.98% in the current March quarter compared to 10.31% and 2.98% corresponding quarter previous year. Cables contributed 76% of total revenue and grew 16% YOY. Stainless steel wire business grew 25% YOY where as turnkey projects declined 11% YOY in the current March quarter. Net Export sales stood at Rs. 720 Mn in the current quarter against Rs. 580 Mn corresponding quarter previous year, rising 24% YOY. Major concern area for the company remains interest expense which constitutes 4% of revenues at Rs. 304 Mn in the current March quarter.

KEI Industries Ltd with market cap of Rs. 15800 Mn is a ranked amongst the top three cable manufacturing companies in India, catering to requirements of a wide spectrum of sectors, such as- Power, Oil Refineries, Railways, Automobiles, Cement, Steel, Fertilizers, Textile And Real Estate etc. The company has performed well in the current quarter and is expected to improve its margins further in the coming quarters. We recommend BUY for the stock for medium & long term investment with PE multiple of 12.40 x FY18E & 10.02 x FY19E with a target price of Rs. 295.


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