3QFY2018 Result Update | Cable
January 25, 2018
KEI Industries
BUY
CMP
`400
Performance Update
Target Price
`486
Y/E March (` cr)
3QFY18
3QFY17
% yoy
2QFY18
% qoq
Investment Period
12 month
Net sales
889
715
24
749
19
EBITDA
84
77
10
76
11
Stock Info
EBITDA margin (%)
9.5
10.7
(126bp)
10.2
(7bp)
Sector
Cable
Adjusted PAT
39
26
51
29
37
Market Cap (Rs cr)
3,136
Source: Company, Angel Research
Net Debt
510
For 3QFY2018, KEI Industries (KEI) posted good set of results, exceeding our
Beta
0.6
52 Week High / Low
423/134
expectations on both, top-line as well as bottom-line fronts. Revenues grew by
Avg. Daily Volume
16,814
~24% yoy (above our estimate), however, the company reported lower operating
Face Value (Rs)
10
margins. On the bottom-line front, KEI reported growth of ~51% yoy to `39cr on
BSE Sensex
36,050
Nifty
11,070
the back of strong top-line growth and lower interest cost.
Reuters Code
KEIN.BO
Top-line driven by strong volume growth: The company’s top-line grew by ~24%
Bloomberg Code
KEII.IN
yoy to `889cr on the back of strong growth in volume (grew by ~19% yoy) and
price hike. Currently the company has order book of `2,331cr (out which EPC is
Shareholding Pattern (%)
around `1,290cr and balance from cables, substation & EHV)
Promoters
46.3
Strong revenue growth and lower interest cost boost overall profitability: On the
MF / Banks / Indian Fls
12.4
operating front, the company’s margin remained lower on yoy at 9.5%. The
FII / NRIs / OCBs
6.4
company reported ~51% yoy rise in its net profit to `39cr on the back of strong
Indian Public / Others
34.9
revenue growth and lower interest cost.
Outlook and Valuation: We expect KEI to report net revenue CAGR of ~18% to
Abs. (%)
3m 1yr 3yr
~`3,660cr over FY2017-19E mainly due to (a) higher order book execution in EPC
Sensex
10.9
32.1
22.3
segment; (b) growth in EHV business; (c) higher B2C sales; and (d) higher exports.
KEI
25.4
190.0
647.0
On the bottom-line front, we expect a CAGR of ~26% to `156cr over the same
period on the back strong revenue and lower interest costs. At the CMP of `400,
the stock trades at 19.8x its FY2019E EPS of `20.3. Thus, we maintain our Buy
Historical share price chart
rating with the Target Price of `486.
450
400
Key Financials
350
300
Y/E March (` cr)
FY2016
FY2017
FY2018E
FY2019E
250
Net sales
2,326
2,633
3,144
3,660
200
150
% chg
14.5
13.2
19.4
16.4
100
Adj. Net profit
62
98
124
156
50
0
% chg
91.0
58.0
26.3
26.0
EBITDA margin (%)
10.4
10.4
9.9
10.0
EPS (`)
8.1
12.7
16.1
20.3
P/E (x)
49.7
31.4
24.9
19.8
Source: Company, Angel Research
P/BV (x)
8.4
6.7
5.4
4.3
Amarjeet S Maurya
RoE (%)
17.0
21.4
21.6
21.8
022-40003600 Ext: 6831
RoCE (%)
25.1
24.5
24.4
25.4
EV/Sales (x)
1.5
1.4
1.2
1.0
EV/EBITDA (x)
14.8
13.1
11.6
9.9
Source: Company, Angel Research Note: CMP as of January 25, 2018
Please refer to important disclosures at the end of this report
1
KEI Industries| 3QFY2018 Result Update
Exhibit 1: 3QFY2018 Performance
Y/E March (` cr)
3QFY183QFY17 % yoy 2QFY18 % qoq 9MFY189MFY17% yoy
Net Sales
889
715
24.3
749
18.7
2,428
1,889
28.5
Consumption of RM
621
483
28.6
524
18.5
1,695
1,289
31.6
(% of Sales)
69.9
67.6
70.0
69.8
68.2
Staff Costs
37
29
28.6
35
7.0
106
80
32.5
(% of Sales)
4.2
4.0
4.6
4.4
4.2
Other Expenses
146
126
15.8
114
28.3
390
325
20.0
(% of Sales)
16.5
17.7
15.2
16.0
17.2
Total Expenditure
804
638
26.0
673
19.6
2,191
1,693
29.4
Operating Profit
84
77
9.7
76
10.6
237
196
21.0
OPM
9.5
10.7
10.2
9.8
10.4
Interest
25.1
34.0
(26.0)
27.4
(8.1)
82
94
(12.5)
Depreciation
8.2
7.1
15.3
8.1
1.8
24
21
17.4
Other Income
7
0
1
10
3
PBT (excl. Ext Items)
58
36
61.5
42
39.3
141
84
66.5
Ext (Income)/Expense
PBT (incl. Ext Items)
58
36
61.5
42
39.3
141
84
66.5
(% of Sales)
6.6
5.0
5.6
5.8
4.5
Provision for Taxation
19
10
13
46
26
(% of PBT)
33.0
28.2
31.9
32.4
30.7
Reported PAT
39
26
50.7
29
36.9
95
59
62.3
PATM
4.4
3.6
3.8
3.9
3.1
Source: Company, Angel Research
January 25, 2018
2
KEI Industries| 3QFY2018 Result Update
Outlook and Valuation
We expect KEI to report net revenue CAGR of ~18% to ~`3,660cr over FY2017-
19E 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 ~26% to `156cr over the same period on the back strong
revenue and lower interest costs. At the CMP of `400, the stock trades at 19.8x its
FY2019E EPS of `20.3. Thus, we maintain our Buy rating with the Target Price of
`486.
Downside risks to our estimates include
KEI’s EPC segment contributes ~14% in 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
manufacture 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. Their products are supplied to various sectors like oil refineries, railways,
automobiles, cement, steel, fertilizers, textile and real estate sectors.
January 25, 2018
3
KEI Industries| 3QFY2018 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2015
FY2016
FY2017
FY2018E
FY2019E
Total operating income
2,031
2,326
2,633
3,144
3,660
% chg
25.5
14.5
13.2
19.4
16.4
Total Expenditure
1,838
2,083
2,359
2,832
3,294
Raw Material
1,477
1,615
1,829
2,207
2,584
Personnel
62
83
111
126
154
Others Expenses
299
386
419
500
556
EBITDA
193
242
274
311
366
% chg
26.0
25.6
13.1
13.6
17.6
(% of Net Sales)
9.5
10.4
10.4
9.9
10.0
Depreciation& Amortisation
25
25
28
30
32
EBIT
168
217
246
281
334
% chg
27.4
28.9
13.4
14.2
18.9
(% of Net Sales)
8.3
9.3
9.3
8.9
9.1
Interest & other Charges
120
127
123
107
111
Other Income
5
5
10
11
11
(% of PBT)
9.4
5.6
7.8
5.9
4.7
Share in profit of Associates
-
-
-
-
-
Recurring PBT
53
95
134
185
234
% chg
142.3
80.3
40.1
38.7
26.0
Tax
19
33
35
61
77
(% of PBT)
35.2
34.8
26.4
33.0
33.0
PAT (reported)
34
62
98
124
156
Extraordinary Items
2
-
-
-
-
ADJ. PAT
33
62
98
124
156
% chg
180.7
91.0
58.0
26.3
26.0
(% of Net Sales)
1.6
2.7
3.7
3.9
4.3
Basic EPS (`)
4.2
8.1
12.7
16.1
20.3
Fully Diluted EPS (`)
4.2
8.1
12.7
16.1
20.3
% chg
180.7
91.0
58.0
26.3
26.0
January 25, 2018
4
KEI Industries| 3QFY2018 Result Update
Balance Sheet
Y/E March (` cr)
FY2015
FY2016
FY2017
FY2018E FY2019E
SOURCES OF FUNDS
Equity Share Capital
15
15
15
15
15
Reserves& Surplus
288
351
444
559
703
Shareholders Funds
304
367
459
574
718
Minority Interest
-
-
-
-
-
Total Loans
453
498
547
575
597
Deferred Tax Liability
39
40
40
40
40
Total Liabilities
796
905
1,046
1,190
1,355
APPLICATION OF FUNDS
Gross Block
445
500
544
559
589
Less: Acc. Depreciation
147
172
200
230
262
Net Block
298
328
344
329
327
Capital Work-in-Progress
4
29
-
-
-
Investments
3
3
3
3
3
Current Assets
1,036
1,127
1,313
1,616
1,920
Inventories
440
422
490
594
702
Sundry Debtors
480
567
649
792
932
Cash
5
6
37
41
66
Loans & Advances
106
109
111
157
183
Other Assets
5
22
26
31
37
Current liabilities
562
586
618
762
898
Net Current Assets
474
541
695
854
1,021
Deferred Tax Asset
16
4
4
4
4
Mis. Exp. not written off
-
-
-
-
-
Total Assets
796
905
1,046
1,190
1,355
January 25, 2018
5
KEI Industries| 3QFY2018 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2015
FY2016
FY2017
FY2018E FY2019E
Profit before tax
53
95
134
185
234
Depreciation
25
25
28
30
32
Change in Working Capital
5
(51)
(123)
(155)
(143)
Interest / Dividend (Net)
120
127
123
107
111
Direct taxes paid
(9)
(20)
(35)
(61)
(77)
Others
5
8
0
0
0
Cash Flow from Operations
198
185
126
106
157
(Inc.)/ Dec. in Fixed Assets
(17)
(98)
(44)
(15)
(30)
(Inc.)/ Dec. in Investments
0
0
29
0
0
Cash Flow from Investing
(17)
(98)
(15)
(15)
(30)
Issue of Equity
0
0
0
0
0
Inc./(Dec.) in loans
44
92
49
28
21
Dividend Paid (Incl. Tax)
(2)
(3)
(6)
(9)
(13)
Interest / Dividend (Net)
(224)
(175)
(123)
(107)
(111)
Cash Flow from Financing
(181)
(87)
(80)
(87)
(103)
Inc./(Dec.) in Cash
0
1
31
4
25
Opening Cash balances
5
5
6
37
41
Closing Cash balances
5
6
37
41
66
January 25, 2018
6
KEI Industries| 3QFY2018 Result Update
Key Ratios
Y/E March
FY2015
FY2016
FY2017
FY2018E FY2019E
Valuation Ratio (x)
P/E (on FDEPS)
94.9
49.7
31.4
24.9
19.8
P/CEPS
52.5
35.3
24.5
20.0
16.4
P/BV
10.2
8.4
6.7
5.4
4.3
Dividend yield (%)
0.1
0.1
0.2
0.3
0.4
EV/Sales
1.7
1.5
1.4
1.2
1.0
EV/EBITDA
18.3
14.8
13.1
11.6
9.9
EV / Total Assets
4.4
4.0
3.4
3.0
2.7
Per Share Data (`)
EPS (Basic)
4.2
8.1
12.7
16.1
20.3
EPS (fully diluted)
4.2
8.1
12.7
16.1
20.3
Cash EPS
7.6
11.3
16.4
20.0
24.4
DPS
0.4
0.5
0.8
1.1
1.6
Book Value
39.3
47.5
59.4
74.4
93.0
Returns (%)
ROCE
22.2
25.1
24.5
24.4
25.4
Angel ROIC (Pre-tax)
22.5
25.4
25.5
25.4
26.8
ROE
10.7
17.0
21.4
21.6
21.8
Turnover ratios (x)
Asset Turnover (Gross Block)
4.6
4.7
4.8
5.6
6.2
Inventory / Sales (days)
79
66
68
69
70
Receivables (days)
86
89
90
92
93
Payables (days)
40
41
41
41
41
Wc cycle (ex-cash) (days)
126
115
117
120
122
January 25, 2018
7
KEI Industries| 3QFY2018 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
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.
Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
document are those of the analyst, and the company may or may not subscribe to all the views expressed within.
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.
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 Pvt. 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 Pvt.
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Pvt. Limited endeavours 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.
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or in connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
KEI Industries
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
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%)
January 25, 2018
8
