1QFY2019 Result Update | Cable
August 13, 2018
KEI Industries
BUY
CMP
`403
Performance Update
Target Price
`508
Y/E March (` cr)
1QFY19
1QFY18
% yoy
4QFY18
% qoq
Investment Period
12 months
Net sales
884
824
7
1,030
(14)
Stock Info
EBITDA
86
77
12
101
(15)
Sector
Cable
Market Cap (Rs cr)
3,082
EBITDA margin (%)
9.7
9.3
42bp
9.8
(1bp)
Net Debt
750
Beta
0.6
Adjusted PAT
32
27
17
50
(35)
52 Week High / Low
495/307
Source: Company, Angel Research
Avg. Daily Volume
16,814
Face Value (Rs)
2
For 1QFY2019, KEI Industries (KEI) posted mixed set of results. Top-line was lower
BSE Sensex
38,024
Nifty
11,471
compared to our estimates, however, the company was able to maintain the
Reuters Code
KEIN.BO
Bloomberg Code
KEII.IN
bottom-line growth. Revenues grew by
~7% yoy (below our estimate) but
company reported improvement on operating margin front. On the bottom-line
Shareholding Pattern (%)
Promoters
46.3
front, KEI reported growth of ~17% yoy to `32cr on the back of operating margin
MF / Banks / Indian Fls
11.9
improvement and lower interest cost.
FII / NRIs / OCBs
9.9
Indian Public / Others
31.9
Lower EPC order execution and export impacted the overall sales growth: The
Abs. (%)
3m 1yr
3yr
company’s top-line grew lower by ~7% yoy to `884cr mainly due to lower export
Sensex
7.4
20.1
34.8
sales (~`79cr in 1QFY2019 vs. ~`110cr in 1QFY2018) in cable segment and
KEI
(7.3)
85.8
293.4
EPS business also impacted sales. Cable segment grew by ~13% yoy during the
quarter, whereas Turnkey Projects reported de-growth of ~23% yoy. Currently,
the company has order book of `2,599cr (out of which EPC is around `1,290cr
and balance from cables, substation & EHV). Further, the company has L1 order
worth ~`1,592cr.
Profitability driven by operating margin improvement and lower interest: On the
operating front, the company’s margin has improved 42bps yoy at
9.7%.
However, KEI reported ~17% yoy rise in its net profit to `32cr on the back of
better operating performance and lower interest cost.
Outlook and Valuation: We expect KEI to report net revenue CAGR of ~16% to
~`4,646cr over FY2018-20E mainly due to (a) higher order book execution in
EPC segment; (b) growth in EHV business; (c) higher B2C sales; and (d) higher
exports. On the bottom-line front, we expect a CAGR of ~19% to `207cr over the
Historical share price chart
same period on the back of strong revenue and lower interest costs. At the CMP
600
of `433, the stock trades at 15x its FY2020E EPS of `26.8, thus, we maintain our
500
Buy rating on KEI Industry with the Target Price of `508.
400
Key Financials
300
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
200
Net sales
2,628
3,466
4,049
4,646
100
% chg
13.0
31.8
16.8
14.7
0
Adj. Net profit
94
145
174
207
% chg
50.6
54.6
19.9
19.1
EBITDA margin (%)
10.2
9.8
10.0
10.0
Source: Company, Angel Research
EPS (`)
12.1
18.7
22.5
26.8
P/E (x)
33.2
21.4
17.9
15.0
Amarjeet S Maurya
P/BV (x)
6.6
5.1
4.0
3.2
022-40003600 Ext: 6831
RoE (%)
19.8
23.8
22.6
21.6
RoCE (%)
20.3
22.6
24.4
24.9
EV/Sales (x)
1.4
1.1
0.9
0.8
EV/EBITDA (x)
14.1
11.1
9.2
7.9
Source: Company, Angel Research Note
Please refer to important disclosures at the end of this report
1
KEI Industries| 1QFY2019 Result Update
Exhibit 1: 4QFY2018 Performance
Y/E March (` cr)
1QFY19
1QFY18
% yoy
4QFY18
% qoq
FY2018
FY2017
% chg
Net Sales
884
824
7.3
1,030
(14.2)
3,466
2,628
31.8
Consumption of RM
578.4
550
5.2
715.7
(19.2)
2,411
1,828
31.9
(% of Sales)
65.4
66.8
69.5
69.6
69.5
Staff Costs
41
34
17.6
41
(0.8)
147
112
31.4
(% of Sales)
4.6
4.2
4.0
4.2
4.3
Other Expenses
179
162
10.2
173
3.5
568
420
35.2
(% of Sales)
20.2
19.7
16.8
16.4
16.0
Total Expenditure
798
747
6.8
929
(14.2)
3,126
2,360
32.5
Operating Profit
86
77
12.2
101
(14.8)
339
269
26.2
OPM
9.7
9.3
9.8
9.8
10.2
Interest
28.7
29.9
(4.3)
28.8
(0.6)
112
124
(10.1)
Depreciation
8.4
8.0
4.6
8.0
4.6
32
28
13.5
Other Income
1
2
(1)
9
10
PBT (excl. Ext Items)
50
40
24.3
64
(21.0)
204
126
62.2
Ext (Income)/Expense
PBT (incl. Ext Items)
50
40
24.3
64
(21.0)
204
126
62.2
(% of Sales)
5.7
4.9
6.2
5.9
4.8
Provision for Taxation
18
13
14
60
32
(% of PBT)
36.0
32.1
22.1
29.2
25.7
Reported PAT
32
27
17.1
50
(35.1)
145
94
54.6
PATM
3.6
3.3
4.8
4.2
3.6
Minority Interest After NP
Extra-ordinary Items
Reported PAT
32
27
17.1
50
(35.1)
145
94
54.6
Source: Company, Angel Research
August 13, 2018
2
KEI Industries| 1QFY2019 Result Update
Outlook and Valuation
We expect KEI to report net revenue CAGR of ~16% to ~`4,646cr over FY2018-
20E mainly due to (a) higher order book execution in EPC segment; (b) growth in
EHV business; (c) higher B2C sales; and (d) higher exports. On the bottom-line
front, we expect a CAGR of ~19% to `207cr over the same period on the back of
strong revenue and lower interest costs. At the CMP of `433, the stock trades at
15x its FY2020E EPS of `26.8, thus, we maintain our Buy rating on KEI Industry
with the Target Price of `508.
Downside risks to our estimates
KEI’s EPC segment contributes ~14% to the total revenue. This segment
primarily depends upon government spending and any delay in investment
by the government may lead to reduction in order book and would impact its
revenue.
Any unfavorable change in the prices of commodities, forex and interest
rates, and delay in project execution can hurt its profitability.
Company Background
KEI Industries Limited (KEI) is a cable manufacturing company, engaged in
manufacturing and supply of power and other industrial cables. The company is
also engaged in Engineering, Procurement and Construction (EPC) business. It
operates through Cables and Turnkey Projects segments and has its manufacturing
facilities at Bhiwadi & Chopanki in Rajastahn and Silvassa in Dadra and Nagar
Haveli.
The cables segment comprises of a whole range of cables such as Extra High
Voltage (EHV), High tension (HT) and low tension (LT) power cables, control and
instrumentation cables, winding wires, flexible wires, and house and stainless steel
wires. The company's products are supplied to various sectors like oil refineries,
railways, automobiles, cement, steel, fertilizers, textile and real estate sectors.
August 13, 2018
3
KEI Industries| 1QFY2019 Result Update
Profit & Loss Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
Total operating income
2,628
3,466
4,049
4,646
% chg
13.0
31.8
16.8
14.7
Total Expenditure
2,360
3,126
3,644
4,181
Raw Material
1,828
2,411
2,859
3,280
Personnel
112
147
170
195
Others Expenses
420
568
615
706
EBITDA
269
339
405
465
% chg
11.0
26.2
19.4
14.7
(% of Net Sales)
10.2
9.8
10.0
10.0
Depreciation& Amortisation
28
32
35
40
EBIT
240
307
370
425
% chg
10.8
27.7
20.4
15.0
(% of Net Sales)
9.1
8.9
9.1
9.1
Interest & other Charges
124
112
121
127
Other Income
10
9
10
10
(% of PBT)
8.0
4.5
3.9
3.2
Share in profit of Associates
-
-
-
-
Recurring PBT
126
204
259
309
% chg
32.2
62.2
26.7
19.1
Tax
32
60
86
102
(% of PBT)
25.7
29.2
33.0
33.0
PAT (reported)
94
145
174
207
Extraordinary Items
-
-
-
-
ADJ. PAT
94
145
174
207
% chg
50.6
54.6
19.9
19.1
(% of Net Sales)
3.6
4.2
4.3
4.4
Basic EPS (Rs)
12.1
18.7
22.5
26.8
Fully Diluted EPS (`)
12.1
18.7
22.5
26.8
% chg
50.6
54.6
19.9
19.1
August 13, 2018
4
KEI Industries| 1QFY2019 Result Update
Balance Sheet
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
SOURCES OF FUNDS
Equity Share Capital
16
16
16
16
Reserves& Surplus
458
593
752
942
Shareholders’ Funds
473
608
768
958
Minority Interest
-
-
-
-
Total Loans
713
750
750
750
Deferred Tax Liability
46
46
46
46
Total Liabilities
1,233
1,404
1,564
1,755
APPLICATION OF FUNDS
Gross Block
604
624
654
685
Less: Acc. Depreciation
199
231
266
306
Net Block
405
393
388
380
Capital Work-in-Progress
3
3
3
3
Investments
3
3
3
4
Current Assets
1,399
1,830
2,158
2,514
Inventories
499
665
777
891
Sundry Debtors
739
883
1,032
1,184
Cash
37
76
107
160
Loans & Advances
119
173
202
232
Other Assets
5
34
40
46
Current liabilities
582
829
992
1,149
Net Current Assets
818
1,001
1,166
1,365
Deferred Tax Asset
3
3
3
3
Mis. Exp. not written off
-
-
-
-
Total Assets
1,233
1,404
1,564
1,755
August 13, 2018
5
KEI Industries| 1QFY2019 Result Update
Consolidated Cash Flow Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E FY2020E
Profit before tax
134
204
259
309
Depreciation
34
32
35
40
Change in Working Capital
(259)
(145)
(134)
(145)
Interest / Dividend (Net)
123
112
121
127
Direct taxes paid
(30)
(60)
(86)
(102)
Others
3
0
0
0
Cash Flow from Operations
4
144
196
227
(Inc.)/ Dec. in Fixed Assets
1
(20)
(30)
(31)
(Inc.)/ Dec. in Investments
(62)
0
0
0
Cash Flow from Investing
(62)
(20)
(30)
(31)
Issue of Equity
0
0
0
0
Inc./(Dec.) in loans
251
37
0
0
Dividend Paid (Incl. Tax)
(4)
(10)
(14)
(17)
Interest / Dividend (Net)
(158)
(112)
(121)
(127)
Cash Flow from Financing
89
(85)
(135)
(143)
Inc./(Dec.) in Cash
31
39
31
53
Opening Cash balances
6
37
76
107
Closing Cash balances
37
76
107
160
August 13, 2018
6
KEI Industries| 1QFY2019 Result Update
Key Ratios
Y/E March
FY2017
FY2018
FY2019E
FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
33.2
21.4
17.9
15.0
P/CEPS
25.4
17.5
14.9
12.6
P/BV
6.6
5.1
4.0
3.2
Dividend yield (%)
0.2
0.3
0.4
0.5
EV/Sales
1.4
1.1
0.9
0.8
EV/EBITDA
14.1
11.1
9.2
7.9
EV / Total Assets
3.1
2.7
2.4
2.1
Per Share Data (`)
EPS (Basic)
12.1
18.7
22.5
26.8
EPS (fully diluted)
12.1
18.7
22.5
26.8
Cash EPS
15.8
22.9
27.0
31.9
DPS
0.7
1.3
1.8
2.1
Book Value
61.3
78.7
99.4
124.0
Returns (%)
ROCE
20.3
22.6
24.4
24.9
Angel ROIC (Pre-tax)
21.0
24.0
26.3
27.5
ROE
19.8
23.8
22.6
21.6
Turnover ratios (x)
Asset Turnover (Gross Block)
4.3
5.6
6.2
6.8
Inventory / Sales (days)
69
70
70
70
Receivables (days)
103
93
93
93
Payables (days)
42
40
41
42
Working capital cycle (ex-cash) (days)
130
123
122
121
August 13, 2018
7
KEI Industries| 1QFY2019 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Disclosure of Interest Statement
KEI Industries
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
August 13, 2018
8
