Target: ₹2,908

CMP: ₹2,415.20

We introduce FY26 estimates and upgrade the stock to ‘Buy’ from Hold as we roll forward to Sep’25E, revised TP of ₹2,908 @ 33x FY26 EPS (₹2,319 earlier).

We met management of KEI Industries (KEI) to gauge the demand, competitive scenario and capacity constraints. The company has maintained its healthy revenue growth guidance at 16-17 per cent and expects 11 per cent margins in the near term, given strong demand outlook in sectors like Infra/Railway/Data Centres etc.

KEI is expected to do capex of ₹350 crore in FY24, which includes ₹250-300 crore for greenfield expansion at Gujarat and ₹45 crore related to brownfield expansion at Silvasa (already invested ₹50 crore in FY23)

We are positive for long term given focus on diversification of product portfolio and de-risking business (retail accounts for about 44 per cent with target to reach 48-50 per cent in FY24), scale-up in distribution network (1,910 dealers, will grow by 7-8 per cent p.a), healthy balance sheet with net cash of 400 crore (including acceptances) by Mar-23 and strong order book of 3,570 crore across domestic & export EPC & cables businesses.

We expect Revenue/EBITDA/ PAT CAGR of 16.7/20.3/21.3 per cent over FY23-26.