Prabhudas Lilladher has given Accumulate recommendation for KEI Industries with a target price of Rs. 1183 in its research report issued on Jan 28, 2022
Prabhudas Lilladher’s research report on KEI Industries
We cut our FY22 EPS by 1.1% largely due to RM inflation led margin pressure. However, we raise our FY23/FY24 EPS by 3.2%/ 5.1% given 1) strong demand environment & 2) smart recovery in margins aided by rising B2C mix. KEI remains optimistic of demand environment aided by rising govt/ pvt capex & sustained growth in B2C sales. 3Q margins were under pressure due to execution of pending orders, however, with no legacy orders in back log & pricing action, margins are expected to bounce back. We remain structurally positive on KEI for longer term given 1) increased Infra, Industrial, Railways, Housing & Solar activity 2) wide product portfolio 3) amongst very few players having EHV cable capabilities 4) sustained momentum in dealer network sales (41% of 9M sales, up 850bps) and 5) tapping into rising export opportunities.
We estimate Sales/ PAT CAGR of 21.2%/ 27% over FY21-24E. We value the stock at 19x FY24 EPS (~27% discount to Polycab) and arrive at target price of Rs1,183. We maintain Accumulate rating and expect returns to be back ended given sharp run up (55%) over past 6 months.