Xtrade Stock Overview for 12th January 2018

KEI Industries, engaged in manufacturing of wires and cables, stands to benefit from establishment of strong distribution network leading to increase in retail revenue share. Further, positive investment outlook in power and distribution business is expected to trigger demand for company’s products. Expect revenue and PAT CAGR of 13% and 17% respectively over FY17-19E.
KEI is one of the leading manufacturers of cables and wires in India. It derives 82% of revenue from cables and wires business, 14% from turnkey projects and 4% from stainless steel wire segment (FY17). In cable, LT power/rubber cable is major contributor to company’s revenue (41%).
The company plans to increase its distribution network from current 926 to 1,500 by FY19e. With this, and higher advertisement spend, expect retail revenue share to increase to 40-45% in coming fiscals. Moreover, Government’s rural electrification target of reaching 18,452 villages by FY18e is expected to aid demand for its products. Besides, Power Grid and state electricity boards plans to invest Rs 44,000cr over FY17-FY20 to improve intra-state transmission network. This is expected to further augment its order book of Rs 2,347cr as on September 30, 2017. With execution of current order book and international orders bidding, we expect revenue to grow at 13% CAGR over FY17-19. The company’s debt reduction plan and high margin retail business will contribute significantly in 17% CAGR PAT over FY17-19.

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