KEI Industries shares gain for the eight consecutive day; stock surges 5%

The stock hit a new high of Rs 531, rallied 37% since May 17, 2019, after the company reported a strong operational performance in the March quarter.

KEI Industries gained ground for the eighth session, up 5 per cent at Rs 531 levels in otherwise weak market on Wednesday. This is also a high for the stock on the BSE.

Since May 17, 2019, the stock of cable manufacturing company has rallied 37 per cent, after the company reported a strong operational performance in the March quarter (Q4FY19). In comparison, the S&P BSE Sensex was up 4.4 per cent during the same period.

KEI Industries’ operating profit in Q4FY19 rose 36 per cent at Rs 138 crore against Rs 101 crore in the year-ago quarter. The operating margin improved 113 basis points (bps) at 10.93 per cent due to increase in sales and better product mix. The company’s revenue grew 22 per cent at Rs 1,259 crore, while net profit jumped 21 per cent at Rs 60 crore over the previous year quarter.

This is the eleventh quarter of straight double-digit revenue growth for the company. Strong growth was led by exports, which was up 37 per cent, EPC sales was up 31 per cent and domestic cables was up 14 per cent, driven by extra high voltage (EHV) & high tension (HT) cables.

Currently, the company's order book stands at Rs 4,700 crore, with strong order wins in EPC. Management expects FY20 growth to be 17- 18 per cent yoy on the back of strong order book and higher retail sales.

Analysts at YES Securities say the earnings momentum would remain strong going ahead on the back of increased penetration in domestic market, higher export and institutional sales and contribution from newly expanded capacity.

“We believe the company would continue to witness valuation re-rating as earnings growth remains robust on a large base, D/E declines and RoE would stay +25 per cent levels”, the brokerage firm said in a recent note with target price of Rs 558 per share.

“We forecast KEI to grow revenues at 16.1 per cent CAGR from FY19-21 but profits by 26.7 per cent CAGR over the same period on back of strong volume growth which will result in better fixed cost absorption strong volume growth. A richer product mix will help push EBITDAM to 10.6 per cent in FY20E and further to 10.7 per cent in FY21E,” analysts at Prabhudas Lilladher said in result update with target price of Rs 599 per share.