KEI Industries nears record high; surges 25% in a week on strong Q4 results

KEI Industries shares were trading higher for the fifth straight day, up 4 per cent at Rs 486 on the BSE on Friday, after the company reported a strong operational performance in the March quarter (Q4FY19).

The stock was trading close to its all-time high level of Rs 495 touched on May 30, 2018. Thus far in the current week, it has rallied 25 per cent, as compared to a 2.6 per cent rise in the S&P BSE Sensex. In the past three months, it has surged 51 per cent against an 8.5 per cent gain in the benchmark index.

The cable manufacturing company's 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.

Net sales 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.

Currently, KEI Industries have strong pending orders worth Rs 4,707 crore plus L1 Rs 113 crore for extra high voltage (EHV).

The management has guided 18-20 per cent growth in revenues in FY20 on the back of demand from conversion of refineries to meet BS VI norms, metro projects, distribution strengthening in power sector and state orders for underground cabling to improve overall efficiency and reduce AT&C losses. EBITDAM (earnings before interest, income taxes, depreciation, amortization, and management fees) could also improve to 11 per cent going ahead as retail sales and revenues from EHV segment increase.

Analysts at Prabhudas Lilladher forecast KEI Industries 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 the 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.

Newer capacities are likely to achieve optimum utilization within 18-24 months of setting up as the company already has a well established position in the institutional segment, is witnessing strong demand from the retail segment and expanding footprints globally, the brokerage firm said result update with ‘buy’ rating on the stock and target price of Rs 599 per share.

Interestingly, in the previous election calendar year 2014, the stock zoomed 314 per cent, while in 2009, it rallied 133 per cent.