Buy KEI Industries, target price Rs 381: Yes Securities

Yes Securities has given a buy rating to KEI Industries with a target price of Rs 381 based on 12 times FY22E P/E.

According to the brokerage, KEI managed to report steady numbers led by strong growth in its exports, EHV and B2B business. Even with 10 days of lost sales (Rs1.25bn), revenues remained flat on a year on year basis. Through the dealer network, sales were weak during the quarter at - 20.7% year on year as substantial sales happen in the second half of March.

KEI is currently operating at 50% utilization levels. It is witnessing good demand for housing wires from non-metro areas and from export market.

Investment Rationale

The brokerage believes the company would be less impacted compared to its peers due to its product portfolio and high revenue share of non-metro regions Yes Securities cut FY21E/22E estimates by 41.7%/32.9% factoring in the delay in capex plans and slower recovery in housing wires. It maintains the buy rating on the stock with a revised target price of Rs 381. Valuations at 9.1 times FY22E P/E are quite attractive.

Risk to the call Slower recovery in export and domestic cable market

Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 1258.53 Crore, down -4.24 % from last quarter Sales of Rs 1314.22 Crore and up .02 % from last year's same quarter Sales of Rs 1258.33 Crore. The company reported net profit after tax of Rs 62.06 Crore in the latest quarter.

Promoter/FII Holdings

Promoters held 40.50 per cent stake in the company as of March 31, 2020, while FIIs held 15.30 per cent, DIIs 24.7 per cent and public and others 19.49 per cent.