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Target: ₹3,600
CMP: ₹3,385.30
KEI Industries is on a healthy and sustainable growth trajectory as it is catering to diversified user industries, increasing its focus on the retail segment, strengthening its high-margin EHV, and carrying out capex to meet the rising demand. Additionally, the company has been gaining significant traction in exports.
Operating margin is expected to increase on account of operating leverage, increasing proportion of retail sales and exports in total revenue, and higher sales of EHV cables post capacity expansion.
We believe the company is on a healthy and sustainable growth trajectory. Management has provided an optimistic demand outlook for both the retail and institutional segments, driven by private capex and increased government spending, respectively. We expect a revenue/PAT CAGR of 17 per cent/about 21 per cent over FY2023-FY2026.
The stock is currently trading at a P/E of ~34x its FY2026E EPS. Considering the economic upcycle and strong earnings outlook, we assign a target multiple of 39x its FY2026. We reiterate our Buy rating on the stock with a revised price target of ₹3,600.
Key Risks: Volatile input costs may adversely hit margin guidance. Revenue is partially generated from exports and any fluctuations in forex rates could affect the company’s financials.
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