KEI Industries hosted a conference call on Nov 1, 2023. In the conference call the
company was represented by Anil Gupta, CMD.
Key takeways of the call
Pending order book as end of Sep 2023 was Rs 3363 crore [EPC
Rs 804 crore; EHV Rs 725 crore, Domestic cables Rs 1548 crore, Export 286 crore].
Cable sales were higher mainly due to volume growth. The
cable division reported a volume growth of 26% in H1FY24. Prices of most raw
materials except aluminum (that declined by 10-12% y-o-y) remained stable.
Sales of C& W through Dealer/ Distribution contributed
approximately 47.41% of overall sale in Q2FY24 and 47.32% of for H1FY24. B2B
contribution in Q2FY24 split is Institutional Domestic 27%; Institutional
Exports 15% and EHV 6%.
The total active working dealer of the company as on
30.09.2023 was approx. 1950 Nos.
Sales through Dealer/ Distribution market increased by
approx 14.26%YoY for Q2FY24 and 17.3%YoY for H1FY24.
Typically the EBITDA margin for Domestic Institutional is
about 10-10.5%; Exports Institutional is 11%; EHV cables are 15% and dealer
distribution is about 11%.
Good growth in company’s business in domestic in current
fiscal and the same is expected to sustain in next fiscal as well. Focusing on geographical
expansion in exports.
EHV market size of India is about Rs 2500-3000 crore
currently with about 4-5 players.
EHV Rs 560-600 crore
of revenue guidance for FY24 remains.
Capacity utilization for cables is 97% and for house wire it
is 70%. Steel wire 750 tonnes/month of capacity
700-730 tonnes is production
House Wire - the company targets a growth of 22-25% and the
growth so far is in line with that kind of target growth.
The company plans to incur capital expenditure approximately
Rs 300-350 crore every year for the next 2-3 years.
The company has planned greenfield plant for cables and
wires in Gujarat at Sanand with the capex of Rs 250-300 crore. The company
expects the first phase of the commercial production to commence by Q4FY25. The
company is also doing greenfield expansion in Pathredi in Rajasthan with an
approximate cost of Rs 110 crore, which will increase the capacity of low
tension power cable by approximately Rs 800-900 crore per annum. This plant
will be operational in the Q1FY24.
The company has incurred a capex of Rs 221 crore during
H1FY24 of which the company spent about Rs 43 crore in Chinchwad, Rs 5 crore in
Pathredi, Rs 140 crore in Daman plant and balance are maintenance capex and in
our Baroda (Kheda) land. In H2FY24 the company will incur a capex of about Rs 75
crore for Pathredi plant and balance Rs 30 crore in Q1FY25.
The company undertook a brownfield capex of Rs 45 crore in
its Silvassa plant. The company now plans to increase this capex to Rs 110
crore, which increase the revenue to house wires and low-tension power cables
by approximately Rs 800-900 crore. Of this new capacity, a capacity of around
Rs 240 crore per annum has been commissioned in October 2023. Similar capacity
is expected to come online by December 2023 with the rest being commissioned by
end of this financial year.
Expect a revenue growth of 16-17%
for FY24 as well as FY25. Company expects 100 bps expansion in EBITDA margin
from about 10-10.5% going forward as the sales are on steady rise.
The company will be adding additional capacity (that support
a revenue of Rs 2000 crore) by this fiscal and add more capacity (that support incremental
revenue of Rs 2500 crore) by next fiscal.
Capacity addition undertaken in
existing plants is to facilitate the company to sustain similar level of revenue
growth (16-17%) for FY25. After wards
the new Greenfield capacity will be available to support further growth.
Domestic institutional and global institutional market has high
entry barrier.
Export contribution to STO before Covid stood at about 13%
and during the period of Covid it has dropped to about 10%. But now the share
of exports in STO has recovered back to 12% and now the company wants to take
it back to about 18-20% of the STO.
Good spending in power T&D industry in USA. As US has not invested for many years in Cables production
capacities there is an opportunity for the company to tap as the customers look
for China+1 stragegy.
Gross Debt as end of Sep 2023 is Rs 159 crore [ TL/WC debt
is Rs 23 crore; Channel Finance is RS 136 crore] and cash and bank balance is
Rs 449 crore. The acceptance is Rs 289 crore.
For Q2FY24 WC
interest Rs 4 crore. BC 1.5 crore, processing charges there by totaling to Rs 7.53 crore. Interest
on fd Rs 3.8 crore.
In EHV sales about 20% goes to EPC.
Organised Cable and wire industry is growing at an annual
rate of 12-13% due to large infrastructure capex from the government end, which
includes road, rail, metro rail, rapid rail, airports and the seaports.
Moreover, the core sector is also doing lot of capital expenditure, which will
also increase the demand for cable and wire. The management believe that
company can grow faster than the industry as smaller and unorganized players
lack management bandwidth and the capital to expand their production.
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