KEI Industries' Q3 earnings surprise on higher margins despite flat revenue

KEI Industries delivered a strong operational performance in the third quarter (Q3FY26), with profitability surpassing both JM Financial’s and Street estimates, led by margin expansion despite revenue coming in largely in line. The company’s Q3 PAT exceeded expectations on the back of improved gross margins and operating leverage, reinforcing confidence in its core Cable & Wire (C&W) business, while EPC emerged as an incremental growth driver.

 

For the quarter, KEI reported revenue of ₹2,950 crore, broadly in line with JM Financial’s estimate but around 4 per cent lower than consensus. Revenue growth was supported by a healthy 20 per cent year-on-year (Y-o-Y) rise in the C&W segment and a sharp 81 per cent Y-o-Y increase in the EPC business, albeit on a weak base. However, the highlight of the quarter was margin performance. Gross margin improved to 24.8 per cent, higher than both estimates and last year’s 23.5 per cent, which translated into a meaningful Ebitda beat. Adjusted Ebitda stood at ₹330 crore, about 13 per cent above JM Financial’s estimate, while Ebitda margin expanded 140 basis points (bps) Y-o-Y to 11.2 per cent, considerably ahead of expectations.

 

This operating outperformance flowed through to the bottom line, with adjusted PAT at ₹240 crore, marking a 48 per cent Y-o-Y growth and beating estimates by double digits. JM Financial attributes the margin-led surprise to a combination of higher gross margins, possibly aided by inventory gains, and operating leverage, though further clarity is awaited from the management concall.

 

Segmentally, the C&W business continued to show resilience, reporting an Ebit margin of 12 per cent, up 190 bps Y-o-Y. While pricing tailwinds supported revenue growth, rising copper prices through the quarter suggest that underlying volume growth may have been in the mid-single digits, making volumes a key monitorable going forward. The stainless steel wires segment, however, remained subdued, posting a 1 per cent Y-o-Y decline.

 

A deeper look at the product mix reveals divergent trends. LT cables, KEI’s largest vertical, grew 23 per cent Y-o-Y and accounted for 41 per cent of consolidated revenue. Housing wires saw a sharp 46 per cent Y-o-Y surge, increasing their share to 35 per cent. In contrast, HT cables declined 25 per cent Y-o-Y, while the EHV segment posted robust 82 per cent growth, raising its revenue contribution to 5 per cent from 3 per cent a year ago.

 

Channel-wise, growth was clearly skewed towards the dealer (retail) segment. Dealer channel revenue jumped 29 per cent Y-o-Y, raising its contribution to 55 per cent of total revenue from 51 per cent last year. Institutional revenue grew a relatively modest 10 per cent Y-o-Y. Within the institutional segment, exports stood out, surging 95 per cent Y-o-Y to ₹500 crore and accounting for 17 per cent of total revenue, up from 10 per cent Y-o-Y. Notably, exports carry higher margins compared to domestic institutional sales, providing an additional profitability kicker.

 

On valuation, JM Financial maintains a ‘Buy’ rating on KEI Industries, valuing the stock at 40x Dec’27E EPS and assigning a target price of ₹5,100. Key variables to track remain volume growth trends, capacity and capex timelines, and the impact of elevated copper prices.

 

Motilal Oswal, too, highlighted the company’s strong execution, noting that KEI’s recent performance was above expectations, driven by solid growth in the C&W and EPC segments. 

 

While it remains structurally positive on the C&W sector and maintains a ‘Buy’ rating, Motilal Oswal plans to revisit its assumptions post the management concall scheduled for today, January 22, 2026.

 

Meanwhile, on the bourses at 10:50 AM, KEI Industries shares were trading 3.31 per cent lower at ₹3,810 per share. By comparison, BSE Sensex was trading 0.44 per cent higher at 82,267.71.

   

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