Kei ind update
(From credit rating ,concall)
KEI
1…Capex
A… Company plans to invest ~1,000 Cr over next 3 to 4 years to setup a manufacturing facility in Gujarat. It has bought property, and the first stage of the plant is projected to be operational within 18 months from beginning of construction.
…Gujarat project to start sales in Q4 FY ’25.
B… Company plans to invest Rs.50 Cr in expanding its Chinchpada unit. This project is scheduled to be finished in September 2023
C… Plans for a brownfield capex of Rs. 45 Cr in Silvassa plant to be completed by September, brownfield expansion by Q1 FY ’25,
=KEI has lined up a significant capex of ~Rs. 800-1000 crore over the next
three years, likely to be funded by internernal accurals
2…Order Book
Company has a order book of Rs.3,567 Cr, including EPC projects, extra high voltage power cables, and domestic and export cables
3…Segmental
Retail ~ 44%,
Institutional ~ 46%,
Export ~10%
4…U.S. market is a key focus for export growth.
…KEI received clearance for its LT cables, HT cables and solar cables for the US market. It will begin sales in the US market in the 4th quarter of FY 2022-23 to power, gas and petroleum sectors
5…End industries
=Favourable demand drivers in various end user industries such as power generation, transmission and distribution, railways, real estate, among others while maintaining its
profit margin profile.
=ICRA notes that the company’s products are witnessing robust demand from various end-user industries
that are benefitting from government infrastructure development activities, including urban and rural electrification, solar
power projects, tunneling and ventilation projects on highways as well as railway and metro rail projects.
=Additionally, private
capex is currently at healthy levels across sectors such as renewable energy, steel, cement and real estate, including housing
demand, under the GoI’s initiative of ‘Housing for All’
6…To boost its retail sales, KEI has increased its distribution
network to over 1,925 dealers pan India as on June 30, 2023 (Mar 31, 2022: ~1,800), in addition to increasing its employee strength.
7…Despite the commodity headwinds in FY2022, KEI’s margins remained protected on account of
a partial natural hedge as the company maintains an inventory for 2-2.5 months and passes on majority of the raw material
price hikes to customers.
8…NEGATIVES
=KEI’s moderate profit margin profile due to the adverse movements in raw
material prices and foreign currency fluctuation and intense competition in the wires and cable industry, which limits its pricing
power to an extent.
=The cable industry is inherently competitive with the presence of multiple large established
players such as Havells India Limited, Polycab India Limited, Finolex Cables Limited, V Guard Industries Limited, RR Kabel
Limited, etc., in addition to some competition from the unorganised sector. This limits KEI’s pricing power, to an extent,
especially in the retail segment, which is expected to drive its revenue growth over the medium term.
Disc…invested from lower level
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