Trading Bells

KEI Industries (Buy)

CMP: ₹397.85

Target: ₹550

Key takeaways: a)KEI, reported net sales of ₹1,087 crore during October to December 2018, up over 22 per cent from ₹888 crore during the same period of previous year; c) The operating profit was ₹117 crore, over 39 per cent from ₹84 crore in the third quarter of 2017-18; d) Profit after tax rose 24 per cent to ₹48 crore against ₹39 crore in the same quarter of previous year; e) The company’s top-line grew by 22 per cent y-o-y to ₹1,087 crore on the back of strong growth in cables and stainless steel wire segments. Cables segment grew by 25 per cent y-o-y during the quarter, whereas stainless steel wire reported a growth of 19 per cent y-o-y. However, turnkey projects grew only 6 per cent y-o-y.

Outlook and valuation: We believe that KEI is likely to be a major beneficiary of increasing demand from power, infrastructure and real estate sector where it is likely to report revenue/PAT CAGR of 20 per cent/ 30 per cent over FY18-20E. Apart from this, it also has high return ratios, free cash flows and improved balance sheet along with low net debt to equity. Given the high growth expectation along with healthy financials, we have ‘buy’ rating with a target price of ₹550/share.

Published on April 12, 2019