Please refer to important disclosures at the end of this report
1
Y/E March (` cr)
2QFY20
2QFY19
% yoy
1QFY20
% qoq
Net sales
1,230
997
23
1,081
14
EBITDA
122
100
22
114
7
EBITDA margin (%)
9.9
10.1
(12bp)
10.5
(60bp)
Adjusted PAT
76
41
84
46
66
Source: Company, Angel Research
For 2QFY2020, KEI Industries (KEI) posted good set of results, which are largely in
-
line with our expectations on both top-line as well as bottom-
line fronts. Revenue
grew by ~23% yoy, while the company reported a slight marginal
contraction on
operating level. On the bottom-line front, KEI reported growth of ~84
% yoy to
`76cr on the back of strong top-line growth and lower taxes.
Strong growth in Cable and Turnkey Projects
segment boosted the overall profit:
The company’s top-line grew by ~23% yoy to `1,230
cr on the back of strong
growth in Cables and Turnkey Projects segments. Cables segment grew by ~23
%
yoy during the quarter, whereas Turnkey Projects reported a growth of ~97
% yoy.
However, Stainless Steel Wire de-grew only ~7
% yoy. Currently, the company has
order book of `4,370cr (out of which EPC is around `2,033cr, EHV is `628
cr,
cables is `1,188cr and balance from export)
Profitability driven by strong revenue growth and lower taxes:
On the operating
front, the company’s margins contracted 12bps yoy at 9.9% on the back of
lower
retail sales mix. KEI reported ~84% yoy rise in its net profit to `76cr on the
back of
strong top-line growth and lower taxes.
Outlook and Valuation: We expect KEI to report net revenue CAGR of ~18
% to
~`5,872cr over FY2019-21
E mainly due to (a) higher order book execution in EPC
segment; (b) growth in EHV business and (d) higher exports. On the bottom-
line
front, we expect CAGR of ~29% to`300
cr over the same period on the back of
strong volume growth. Thus, we maintain our Hold recommendation on stock.
Key Financials
Y/E March (` cr)
FY2018 FY2019 FY2020E
FY2021E
Net sales 3,466 4,227 5,062 5,872
% chg 31.8 22.0 19.8 16.0
Adj. Net profit 145 182 249 300
% chg 54.6 25.6 36.9 20.6
EBITDA margin (%) 9.8 10.5 10.3 10.3
EPS (`) 18.7 23.5 32.2 38.9
P/E (x) 29.3 23.4 17.1 14.1
P/BV (x) 7.0 5.5 4.2 3.3
RoE (%) 23.8 23.5 24.8 23.4
RoCE (%) 22.6 33.1 31.6 31.2
EV/Sales (x) 1.4 1.1 0.9 0.8
EV/EBITDA (x)
14.5
10.2
8.6
7.3
Source: Company, Angel
Hold
CMP `550
Target Price 661
Investment Period 12 months
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters
MF / Banks / Indian Fls
FII / NRIs / OCBs
Indian Public / Others
Abs. (%) 3m 1yr 3yr
Sensex 9.2 15.9 50.4
KEI 12.7 12.7 330.0
45.6
19.4
13.3
21.7
Net Debt (
`
cr)
Market Cap (
`
cr) 4,319
263
Beta 0.6
52 Week High / Low 614/306
Avg. Daily Volume 11,120
Face Value (
`
) 10
BSE Sensex 40,250
Nifty 11,880
KEIN.BOReuters Code
KEII.IN
Cable
Price Chart
Source: Company, Angel Research
Amarjeet S Maurya
022-40003600 Ext: 6831
amarjeet.maurya@angelbroking.com
KEI Industries
Performance Update
0
100
200
300
400
500
600
700
Nov-16
Feb-17
May-17
Aug-17
Nov-17
Feb-18
May-18
Aug-18
Nov-18
Feb-19
May-19
Aug-19
2
QFY2020 Result Update | Cable
November 13, 2019
KEI Industries| 2
QFY2020 Result Update
November 13, 2019
2
2QFY2020 Performance
Y/E March (` cr)
2
QFY20
2QFY19
% yoy
1QFY20
% qoq
1HFY
20
1HFY19 % chg
Net Sales
1,230
997
23.4
1,081.36
13.8
2,312
1,881
22.9
Consumption of RM
886.3
719
23.3
747.3
18.6
1,671
1,348
24.0
(% of Sales)
72.0
72.1
69.1
72.3
71.7
Staff Costs
57
42
34.0
52
9.9
108.2
82.8
30.7
(% of Sales)
4.6
4.2
4.8
4.7
4.4
Other Expenses
165
135
21.9
169
(2.1) 296.1 263.5
12.3
(% of Sales)
13.4
13.6
15.6
12.8
14.0
Total Expenditure
1,108
897
23.6
967
14.5
2,075
1,694
22.5
Operating Profit
122
100
22.0
114
7.2
236
186
26.6
OPM
9.9
10.1
10.5
10.2
9.9
Interest
35.5
30.5
16.6
33.0
7.8
68.5
59.1
15.8
Depreciation
13.7
8.4
62.0
15.2
(9.8)
28.8
16.8
71.7
Other Income
4
1
5
9.5
2.4
PBT (excl. Ext Items)
77
63
23.6
71
8.8
148
113
31.3
Ext (Income)/Expense
PBT (incl. Ext Items)
77
63
23.6
71
8.8
148
113
31.3
(% of Sales)
6.3
6.3
6.6
6.4
6.0
Provision for Taxation
1
21
25
26.3
39.4
(% of PBT)
1.4
33.8
35.5
17.7
34.9
Reported PAT
76
41
84.1
46
66.2
122
74
65.9
PATM
6.2
4.2
4.2
5.3
3.9
Minority Interest After NP
Extra-ordinary Items
Reported PAT
76
41
84.1
45.82
66.2
122
74
65.9
Source: Company, Angel Research
KEI Industries| 2
QFY2020 Result Update
November 13, 2019
3
Outlook and Valuation
We expect KEI to report net revenue CAGR of ~18% to ~`5,872cr over FY2019-
21E 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 CAGR of ~29% to`300cr over the same period on the back of strong
volume growth. Thus, we maintain our Hold recommendation on stock.
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 & interest rates,
and delay in project execution can hurt the company’s 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 Rajasthan 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.
KEI Industries| 2
QFY2020 Result Update
November 13, 2019
4
Profit & Loss Statement
Y/E March (`cr)
FY2018
FY2019
FY2020E FY2021E
Total operating income
3,466
4,227
5,062
5,872
% chg
31.8
22.0
19.8
16.0
Total Expenditure
3,126
3,785
4,541
5,267
Raw Material
2,411
2,935
3,574
4,146
Personnel
147
173
213
247
Others Expenses
568
677
754
875
EBITDA
339
442
521
605
% chg
26.2
30.3
17.9
16.0
(% of Net Sales)
9.8
10.5
10.3
10.3
Depreciation& Amortisation
32
34
59
62
EBIT
307
408
462
543
% chg
27.7
33.0
13.3
17.5
(% of Net Sales)
8.9
9.7
9.1
9.3
Interest & other Charges
112
136
141
150
Other Income
9
7
11
8
(% of PBT)
4.5
2.6
3.3
2.0
Share in profit of Associates
-
-
-
Recurring PBT
204
279
333
401
% chg
62.2
36.6
19.2
20.6
Tax
60
97
84
101
(% of PBT)
29.2
34.9
25.2
25.2
PAT (reported)
145
182
249
300
Extraordinary Items
-
-
-
-
ADJ. PAT
145
182
249
300
% chg
54.6
25.6
36.9
20.6
(% of Net Sales)
4.2
4.3
4.9
5.1
Basic EPS (Rs)
18.7
23.5
32.2
38.9
Fully Diluted EPS (`)
18.7
23.5
32.2
38.9
% chg
54.6
25.6
36.9
20.6
KEI Industries| 2
QFY2020 Result Update
November 13, 2019
5
Balance Sheet
Y/E March (`cr)
FY2018
FY2019
FY2020E
FY2021E
SOURCES OF FUNDS
Equity Share Capital
16
16
16
16
Reserves& Surplus
593
760
989
1,265
Shareholders’ Funds
608
775
1,005
1,281
Minority Interest
-
-
-
-
Total Loans
750
458
458
458
Deferred Tax Liability
46
46
46
46
Total Liabilities
1,404
1,280
1,509
1,785
APPLICATION OF FUNDS
Gross Block
624
654
684
714
Less: Acc. Depreciation
231
265
324
386
Net Block
393
389
360
329
Capital Work-in-Progress
3
3 3 3
Investments
3
3 4 4
Current Assets
1,830
2,182
2,569
3,024
Inventories
665
695
832
965
Sundry Debtors
883
1,089
1,290
1,496
Cash
76
195
204
280
Loans & Advances
173
199
238
276
Other Assets
34
4 5 6
Current liabilities
829
1,301
1,430
1,577
Net Current Assets
1,001
881
1,139
1,447
Deferred Tax Asset
3
3 3 4
Mis. Exp. not written off
-
-
-
-
Total Assets
1,404
1,280
1,509
1,785
KEI Industries| 2
QFY2020 Result Update
November 13, 2019
6
Consolidated Cash Flow Statement
Y/E March (`cr)
FY2018 FY2019
FY2020E
FY2021E
Profit before tax
204
279
333
401
Depreciation
32
34
59
62
Change in Working Capital
(145)
240
(249) (232)
Interest / Dividend (Net)
112
136
141
150
Direct taxes paid
(60) (97)
(84) (101)
Others
0
0
0
0
Cash Flow from Operations
144
592
200
280
(Inc.)/ Dec. in Fixed Assets
(20) (30)
(30)
(30)
(Inc.)/ Dec. in Investments
0
0
0
0
Cash Flow from Investing
(20) (30)
(30)
(30)
Issue of Equity
0
0
0
0
Inc./(Dec.) in loans
37
(292)
0
0
Dividend Paid (Incl. Tax)
(10) (15)
(20)
(24)
Interest / Dividend (Net)
(112) (136)
(141) (150)
Cash Flow from Financing
(85) (442)
(161) (174)
Inc./(Dec.) in Cash
39
120
9
76
Opening Cash balances
37
76
195
204
Closing Cash balances
76
195
204
280
KEI Industries| 2
QFY2020 Result Update
November 13, 2019
7
Key Ratios
Y/E March
FY2018
FY2019 FY2020E
FY2021E
Valuation Ratio (x)
P/E (on FDEPS)
29.3
23.4 17.1
14.1
P/CEPS
24.0
19.7 13.8
11.7
P/BV 7.0 5.5 4.2 3.3
Dividend yield (%) 0.2 0.3 0.5 0.6
EV/Sales 1.4 1.1 0.9 0.8
EV/EBITDA
14.5
10.2 8.6 7.3
EV / Total Assets 3.5 3.5 3.0 2.5
Per Share Data (`)
EPS (Basic)
18.7
23.5 32.2
38.9
EPS (fully diluted)
18.7
23.5 32.2
38.9
Cash EPS
22.9
27.9 39.9
46.8
DPS 1.3 1.9 2.6 3.1
Book Value
78.7
100.4 130.0
165.8
Returns (%)
ROCE
22.6
33.1 31.6
31.2
Angel ROIC (Pre-tax)
24.0
39.4 36.9
37.3
ROE
23.8
23.5 24.8
23.4
Turnover ratios (x)
Asset Turnover (Gross Block) 5.6 6.5 7.4 8.2
Inventory / Sales (days)
70
60 60
60
Receivables (days)
93
94 93
93
Payables (days)
40
64 55
50
Working capital cycle (ex-
cash) (days)
123
90 98
103
KEI Industries| 2
QFY2020 Result Update
November 13, 2019
8
Research Team Tel: 022
-
39357800 E
-
mail: research@angelbroking.com Website: www.angelbroking.com
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
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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
Ratings (
Based on Expected
Returns:
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (
-
5 to 5%)
over 12 months investment period) Reduce (-5% to -15%) Sell (< -15%)
Hold (Fresh purchase not recommended)
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors