3QFY2019 Result Update | Cable
February 12, 2019
KEI Industries
BUY
CMP
`349
Performance Update
Target Price
`486
Y/E March (` cr)
3QFY19
3QFY18
% yoy
2QFY19
% qoq
Investment Period
12 months
Net sales
1,087
889
22
997
9
EBITDA
118
84
40
101
17
Stock Info
EBITDA margin (%)
10.8
9.5
133bp
10.1
70bp
Adjusted PAT
48
39
24
41
17
Sector
Cable
Source: Company, Angel Research
Market Cap (` cr)
2,756
For 3QFY2019, KEI Industries (KEI) posted good set of results, which are largely
Net Debt (` cr)
671
in-line with our expectations on both top-line as well as bottom-line fronts.
Beta
0.6
Revenue grew by
~22% yoy, while the company reported a marginal
52 Week High / Low
495/249
improvement on operating margins front. On the bottom-line front, KEI reported
growth of ~24% yoy to `48cr on the back of strong top-line growth.
Avg. Daily Volume
39,700
Face Value (`)
10
Strong growth in Cable and Stainless Steel Wire segment boosted the overall
profit: The company’s top-line grew by ~22% yoy to `1,087cr on the back of
BSE Sensex
36,212
strong growth in Cables and Stainless Steel Wire segments. Cables segment grew
Nifty
10,859
by ~25% yoy during the quarter, whereas Stainless Steel Wire reported a growth
Reuters Code
KEIN.BO
of ~19% yoy. However, Turnkey Projects grew only ~6% yoy. Currently, the
Bloomberg Code
KEII.IN
company has order book of `3,866cr (out of which EPC is around `1,508cr and
balance from cables, substation & EHV)
Profitability driven by strong volume and operating margin improvement: On the
Shareholding Pattern (%)
operating front, the company’s margins improved 133bps yoy at 10.8% on the
Promoters
45.9
back of lower employee cost and other expenses. KEI reported ~24% yoy rise in
its net profit to `48cr.
MF / Banks / Indian Fls
16.5
FII / NRIs / OCBs
10.0
Outlook and Valuation: We expect KEI to report net revenue CAGR of ~19% to
~`4,878cr over FY2018-20E mainly due to (a) higher order book execution in
Indian Public / Others
27.5
EPC segment; (b) growth in EHV business; (c) higher B2C sales; and (d) higher
exports. On the bottom-line front, we expect CAGR of ~27% to`233cr over the
same period on the back of strong volume growth. Thus, we maintain our Buy
Abs. (%)
3m 1yr 3yr
rating on KEI Industry with a Target Price of `486.
Sensex
3.9
6.2
50.5
Key Financials
KEI
10.0
(9.5)
233.6
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
Price Chart
Net sales
2,628
3,466
4,106
4,878
% chg
13.0
31.8
18.5
18.8
600
Adj. Net profit
94
145
178
233
500
% chg
50.6
54.6
23.1
31.0
400
EBITDA margin (%)
10.2
9.8
10.3
10.5
300
EPS (`)
12.1
18.7
23.1
30.2
200
P/E (x)
28.5
18.5
15.0
11.5
100
P/BV (x)
5.6
4.4
3.5
2.7
0
RoE (%)
19.8
23.8
23.1
23.7
RoCE (%)
20.3
22.6
25.5
27.2
EV/Sales (x)
1.3
1.0
0.8
0.7
Source: Company, Angel Research
EV/EBITDA (x)
12.4
9.9
7.9
6.4
Source: Company, Angel Research Note
Amarjeet S Maurya
022-40003600 Ext: 6831
Please refer to important disclosures at the end of this report
1
KEI Industries| 3QFY2019 Result Update
Exhibit 1: 3QFY2019 Performance
Y/E March (` cr)
3QFY19
3QFY18
% yoy
2QFY19
% qoq
9MFY19
9MFY18
% chg
Net Sales
1,087
889
22.4
997
9.1
2,968
2,428
22.2
Consumption of RM
768.4
621
23.7
680.5
12.9
2,027
1,695
19.6
(% of Sales)
70.7
69.9
68.3
68.3
69.8
Staff Costs
43
37
17.1
42
2.3
126.1
105.9
19.0
(% of Sales)
4.0
4.2
4.2
4.2
4.4
Other Expenses
158
146
8.2
173
(8.7)
510.3
389.7
30.9
(% of Sales)
14.5
16.5
17.4
17.2
16.0
Total Expenditure
970
804
20.6
896
8.2
2,664
2,191
21.6
Operating Profit
118
84
39.6
101
16.7
305
237
28.3
OPM
10.8
9.5
10.1
10.3
9.8
Interest
34.7
25.2
38.1
30.5
13.9
93.9
82.5
13.8
Depreciation
8.5
8.2
3.7
8.5
0.7
25.3
24.3
4.4
Other Income
1
7
1
3.5
9.9
PBT (excl. Ext Items)
76
58
29.7
63
19.7
189
141
34.5
Ext (Income)/Expense
PBT (incl. Ext Items)
76
58
29.7
63
19.7
189
141
34.5
(% of Sales)
7.0
6.6
6.3
6.4
5.8
Provision for Taxation
27
19
22
67.1
45.5
(% of PBT)
36.0
33.0
34.5
35.5
32.4
Reported PAT
48
39
24.0
41
17.0
122
95
28.3
PATM
4.4
4.4
4.2
4.1
3.9
Minority Interest After NP
Extra-ordinary Items
Reported PAT
48
39
24.0
41
17.0
121.9
95.0
28.3
Source: Company, Angel Research
February 12, 2019
2
KEI Industries| 3QFY2019 Result Update
Outlook and Valuation
We expect KEI to report net revenue CAGR of ~19% to ~`4,878cr 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 CAGR of ~27% to `233cr over the same period on the back of
strong volume growth. Thus, we maintain our Buy rating on KEI Industry with a
Target Price of `486.
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.
February 12, 2019
3
KEI Industries| 3QFY2019 Result Update
Profit & Loss Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
Total operating income
2,628
3,466
4,106
4,878
% chg
13.0
31.8
18.5
18.8
Total Expenditure
2,360
3,126
3,683
4,366
Raw Material
1,828
2,411
2,899
3,444
Personnel
112
147
172
205
Others Expenses
420
568
612
717
EBITDA
269
339
423
512
% chg
11.0
26.2
24.7
21.1
(% of Net Sales)
10.2
9.8
10.3
10.5
Depreciation& Amortisation
28
32
35
40
EBIT
240
307
388
473
% chg
10.8
27.7
26.3
21.9
(% of Net Sales)
9.1
8.9
9.4
9.7
Interest & other Charges
124
112
128
130
Other Income
10
9
6
6
(% of PBT)
8.0
4.5
2.3
1.7
Share in profit of Associates
-
-
-
-
Recurring PBT
126
204
266
348
% chg
32.2
62.2
30.1
31.0
Tax
32
60
88
115
(% of PBT)
25.7
29.2
33.0
33.0
PAT (reported)
94
145
178
233
Extraordinary Items
-
-
-
-
ADJ. PAT
94
145
178
233
% chg
50.6
54.6
23.1
31.0
(% of Net Sales)
3.6
4.2
4.3
4.8
Basic EPS (Rs)
12.1
18.7
23.1
30.2
Fully Diluted EPS (`)
12.1
18.7
23.1
30.2
% chg
50.6
54.6
23.1
31.0
February 12, 2019
4
KEI Industries| 3QFY2019 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
756
971
Shareholders’ Funds
473
608
772
987
Minority Interest
-
-
-
-
Total Loans
713
750
750
750
Deferred Tax Liability
46
46
46
46
Total Liabilities
1,233
1,404
1,568
1,784
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
2,176
2,601
Inventories
499
665
787
936
Sundry Debtors
739
883
1,046
1,243
Cash
37
76
96
130
Loans & Advances
119
173
205
244
Other Assets
5
34
41
49
Current liabilities
582
829
1,006
1,208
Net Current Assets
818
1,001
1,170
1,394
Deferred Tax Asset
3
3
3
3
Mis. Exp. not written off
-
-
-
-
Total Assets
1,233
1,404
1,568
1,784
February 12, 2019
5
KEI Industries| 3QFY2019 Result Update
Consolidated Cash Flow Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E FY2020E
Profit before tax
134
204
266
348
Depreciation
34
32
35
40
Change in Working Capital
(259)
(145)
(149)
(189)
Interest / Dividend (Net)
123
112
128
130
Direct taxes paid
(30)
(60)
(88)
(115)
Others
3
0
0
0
Cash Flow from Operations
4
144
193
214
(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)
(19)
Interest / Dividend (Net)
(158)
(112)
(128)
(130)
Cash Flow from Financing
89
(85)
(142)
(149)
Inc./(Dec.) in Cash
31
39
21
34
Opening Cash balances
6
37
76
96
Closing Cash balances
37
76
96
130
February 12, 2019
6
KEI Industries| 3QFY2019 Result Update
Key Ratios
Y/E March
FY2017
FY2018
FY2019E FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
28.5
18.5
15.0
11.5
P/CEPS
21.9
15.1
12.5
9.8
P/BV
5.6
4.4
3.5
2.7
Dividend yield (%)
0.2
0.4
0.5
0.7
EV/Sales
1.3
1.0
0.8
0.7
EV/EBITDA
12.4
9.9
7.9
6.4
EV / Total Assets
2.7
2.4
2.1
1.8
Per Share Data (`)
EPS (Basic)
12.1
18.7
23.1
30.2
EPS (fully diluted)
12.1
18.7
23.1
30.2
Cash EPS
15.8
22.9
27.6
35.3
DPS
0.7
1.3
1.8
2.4
Book Value
61.3
78.7
99.9
127.7
Returns (%)
ROCE
20.3
22.6
25.5
27.2
Angel ROIC (Pre-tax)
21.0
24.0
27.3
29.5
ROE
19.8
23.8
23.1
23.7
Turnover ratios (x)
Asset Turnover (Gross Block)
4.3
5.6
6.3
7.1
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
February 12, 2019
7
KEI Industries| 3QFY2019 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
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Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
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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
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%)
February 12, 2019
8