1QFY2020 Result Update | Cable

August 7, 2019

KEI Industries

BUY

CMP

`464

Performance Update

Target Price

`556

Y/E March (` cr)

1QFY20 1QFY19

% yoy 4QFY19

% qoq

Investment Period

12 months

Net sales

1,081

884

1,259

(14)

EBITDA

114

138

(17)

Stock Info

EBITDA margin (%)

10.5

9.7

79bp

10.9

(39bp)

Sector

Cable

Adjusted PAT

(24)

Market Cap (` cr)

3,659

Source: Company, Angel Research

Net Debt (` cr)

263

For 1QFY2020, KEI Industries (KEI) posted good set of results, which are largely in-

Beta

0.6

line with our expectations on both top-line as well as bottom-line fronts. Revenue

52 Week High / Low

532/248

grew by ~22% yoy, while the company reported a marginal improvement on

operating margins front. On the bottom-line front, KEI reported growth of ~42%

Avg. Daily Volume

39,700

yoy to `46cr on the back of strong top-line growth.

Face Value (`)

Strong growth in Cable and Turnkey Projects segment boosted the overall profit:

BSE Sensex

36,691

The company’s top-line grew by ~22% yoy to `1,081cr on the back of strong

Nifty

10,855

growth in Cables and Turnkey Projects segments. Cables segment grew by ~22%

Reuters Code

KEIN.BO

yoy during the quarter, whereas Turnkey Projects reported a growth of ~36% yoy.

Bloomberg Code

KEII.IN

However, Stainless Steel Wire grew only ~6% yoy. Currently, the company has

order book of `4,414cr (out of which EPC is around `2,210cr, EHV is

`532cr,

cables is `1,029cr and balance from export)

Shareholding Pattern (%)

Profitability driven by strong volume and operating margin improvement: On the

Promoters

45.9

operating front, the company’s margins improved 79bps yoy at 10.5% on the back

of other expenses. KEI reported ~42% yoy rise in its net profit to `46cr.

MF / Banks / Indian Fls

15.5

Outlook and Valuation: We expect KEI to report net revenue CAGR of ~15% to

FII / NRIs / OCBs

10.0

~`5,632cr over FY2019-21E mainly due to (a) higher order book execution in EPC

Indian Public / Others

28.6

segment; (b) growth in EHV business; (c) higher B2C sales; and (d) higher exports.

On the bottom-line front, we expect CAGR of ~22% to`269cr over the same period

on the back of strong volume growth. Thus, we maintain our Buy rating on KEI

Abs. (%)

3m 1yr

Industry with a Target Price of `556.

Sensex

(4.2)

(1.9)

31.2

Key Financials

KEI

13.1

(0.8)

233.6

Y/E March (` cr)

FY2018

FY2019

FY2020E

FY2021E

Net sales

3,466

4,227

4,897

5,632

Price Chart

% chg

31.8

22.0

15.9

15.0

Adj. Net profit

145

182

223

269

600

% chg

54.6

25.6

22.6

20.7

500

EBITDA margin (%)

9.8

10.5

400

300

EPS (`)

18.7

23.5

28.9

34.8

200

P/E (x)

24.7

19.7

16.1

13.3

100

P/BV (x)

5.9

4.6

3.7

2.9

RoE (%)

23.8

23.5

22.7

21.9

RoCE (%)

22.6

33.1

32.3

32.0

EV/Sales (x)

1.2

0.9

0.8

0.7

EV/EBITDA (x)

12.5

8.7

7.5

6.4

Source: Company, Angel Research

Source: Company, Angel Research Note

Amarjeet S Maurya

022-40003600 Ext: 6831

[email protected]

Please refer to important disclosures at the end of this report

KEI Industries| 1QFY2020 Result Update

Exhibit 1: 1QFY2020 Performance

Y/E March (` cr)

1QFY20

1QFY19

% yoy

4QFY19

% qoq

FY2020

FY2019

% chg

Net Sales

1,081

884

22.3

1,259

(14.1)

4,227

3,459

22.2

Consumption of RM

747.3

578

29.2

907.5

(17.7)

2,935

2,411

21.7

(% of Sales)

69.1

65.4

72.1

69.4

69.7

Staff Costs

27.1

8.9

173.4

147.2

17.8

(% of Sales)

4.8

4.6

3.8

4.1

4.3

Other Expenses

169

179

(5.7)

166

1.3

676.7

562.2

20.4

(% of Sales)

15.6

20.2

13.2

16.0

16.3

Total Expenditure

967

798

21.3

1,121

(13.7)

3,785

3,120

21.3

Operating Profit

114

32.3

138

(17.2)

442

338

30.7

OPM

10.5

9.7

10.9

10.5

9.8

Interest

33.0

28.7

15.0

42.3

(22.1)

136.2

111.3

22.3

Depreciation

15.2

8.4

81.6

8.6

75.5

34.0

32.2

5.3

Other Income

7.2

9.3

PBT (excl. Ext Items)

41.3

(21.4)

279

204

36.8

Ext (Income)/Expense

PBT (incl. Ext Items)

41.3

(21.4)

279

204

36.8

(% of Sales)

6.6

5.7

7.2

6.6

5.9

Provision for Taxation

97.4

59.6

(% of PBT)

35.5

36.0

33.6

34.9

29.2

Reported PAT

42.4

(23.5)

182

145

25.8

PATM

4.2

3.6

4.8

4.3

4.2

Minority Interest After NP

Extra-ordinary Items

Reported PAT

42.4

59.9

(23.5)

182

145

25.8

Source: Company, Angel Research

August 7, 2019

KEI Industries| 1QFY2020 Result Update

Outlook and Valuation

We expect KEI to report net revenue CAGR of ~15% to ~`5,632cr 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 ~22% to`269cr 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 `556.

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.

August 7, 2019

KEI Industries| 1QFY2020 Result Update

Profit & Loss Statement

Y/E March (`cr)

FY2018

FY2019

FY2020E

FY2021E

Total operating income

3,466

4,227

4,897

5,632

% chg

31.8

22.0

15.9

15.0

Total Expenditure

3,126

3,785

4,383

5,041

Raw Material

2,411

2,935

3,458

3,976

Personnel

147

173

206

237

Others Expenses

568

677

720

828

EBITDA

339

442

514

591

% chg

26.2

30.3

16.3

15.0

(% of Net Sales)

9.8

10.5

Depreciation& Amortisation

EBIT

307

408

464

539

% chg

27.7

33.0

13.7

16.1

(% of Net Sales)

8.9

9.7

9.5

9.6

Interest & other Charges

112

136

138

145

Other Income

(% of PBT)

4.5

2.6

2.2

1.8

Share in profit of Associates

Recurring PBT

204

279

333

402

% chg

62.2

36.6

19.1

20.7

Tax

110

133

(% of PBT)

29.2

34.9

33.0

PAT (reported)

145

182

223

269

Extraordinary Items

ADJ. PAT

145

182

223

269

% chg

54.6

25.6

22.6

20.7

(% of Net Sales)

4.2

4.3

4.6

4.8

Basic EPS (Rs)

18.7

23.5

28.9

34.8

Fully Diluted EPS (`)

18.7

23.5

28.9

34.8

% chg

54.6

25.6

22.6

20.7

August 7, 2019

KEI Industries| 1QFY2020 Result Update

Balance Sheet

Y/E March (`cr)

FY2018

FY2019

FY2020E

FY2021E

SOURCES OF FUNDS

Equity Share Capital

Reserves& Surplus

593

760

965

1,213

Shareholders’ Funds

608

775

981

1,228

Minority Interest

Total Loans

750

458

Deferred Tax Liability

Total Liabilities

1,404

1,280

1,486

1,735

APPLICATION OF FUNDS

Gross Block

624

654

684

714

Less: Acc. Depreciation

231

265

315

368

Net Block

393

389

369

347

Capital Work-in-Progress

Investments

Current Assets

1,830

2,182

2,492

2,891

Inventories

665

695

805

926

Sundry Debtors

883

1,089

1,248

1,435

Cash

195

204

260

Loans & Advances

173

199

230

265

Other Assets

Current liabilities

829

1,301

1,385

1,515

Net Current Assets

1,001

881

1,106

1,376

Deferred Tax Asset

Mis. Exp. not written off

Total Assets

1,404

1,280

1,486

1,735

August 7, 2019

KEI Industries| 1QFY2020 Result Update

Consolidated Cash Flow Statement

Y/E March (`cr)

FY2018

FY2019

FY2020E FY2021E

Profit before tax

204

279

333

402

Depreciation

Change in Working Capital

(145)

240

(217)

(214)

Interest / Dividend (Net)

112

136

138

145

Direct taxes paid

(60)

(97)

(110)

(133)

Others

Cash Flow from Operations

144

592

195

252

(Inc.)/ Dec. in Fixed Assets

(20)

(30)

(Inc.)/ Dec. in Investments

Cash Flow from Investing

(20)

(30)

Issue of Equity

Inc./(Dec.) in loans

(292)

Dividend Paid (Incl. Tax)

(10)

(15)

(18)

(22)

Interest / Dividend (Net)

(112)

(136)

(138)

(145)

Cash Flow from Financing

(85)

(442)

(156)

(166)

Inc./(Dec.) in Cash

120

Opening Cash balances

195

204

Closing Cash balances

195

204

260

August 7, 2019

KEI Industries| 1QFY2020 Result Update

Key Ratios

Y/E March

FY2018

FY2019

FY2020E

FY2021E

Valuation Ratio (x)

P/E (on FDEPS)

24.7

19.7

16.1

13.3

P/CEPS

20.2

16.6

13.1

11.1

P/BV

5.9

4.6

3.7

2.9

Dividend yield (%)

0.3

0.4

0.5

0.6

EV/Sales

1.2

0.9

0.8

0.7

EV/EBITDA

12.5

8.7

7.5

6.4

EV / Total Assets

3.0

2.6

2.2

Per Share Data (`)

EPS (Basic)

18.7

23.5

28.9

34.8

EPS (fully diluted)

18.7

23.5

28.9

34.8

Cash EPS

22.9

27.9

35.4

41.6

DPS

1.3

1.9

2.3

2.8

Book Value

78.7

100.4

126.9

159.0

Returns (%)

ROCE

22.6

33.1

32.3

32.0

Angel ROIC (Pre-tax)

24.0

39.4

37.7

37.9

ROE

23.8

23.5

22.7

21.9

Turnover ratios (x)

Asset Turnover (Gross Block)

5.6

6.5

7.2

7.9

Inventory / Sales (days)

Receivables (days)

Payables (days)

Working capital cycle (ex-cash) (days)

123

103

August 7, 2019

KEI Industries| 1QFY2020 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

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by Analyst during the past twelve months.

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Disclosure of Interest Statement

KEI Industries

1. Financial interest of research analyst or Angel or his Associate or his relative

2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives

3. Served as an officer, director or employee of the company covered under Research

4. Broking relationship with company covered under Research

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 7, 2019