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KEI Industries hosted a conference call on May 10, 2022. In
the conference call the company was represented by Anil Gupta, CMD and Rajeev
Gupta, ED Finance & CFO.
Key takeaways of the call
Unexecuted Order book as end of Mar 31, 2021 stood at Rs 2419
crore of which EPC orders were RS 959 crore (including Rs 202 crore ADB funded
turnkey project in Nepal and Rs 410 crore project in Zambia), EHV orders were
Rs 224 crore, domestic cables of Rs 1100 crore and Export orders of Rs 137
crore. In addition it is L1 for orders
worth Rs 61 crore.
In Q4FY22 W&C registered a volume growth of 19.7%.
Capacity utilisation in FY22 was 76% for Cables, 59% for
House Wires, 89% for SS wires.
For FY23, the company expects its overall sales to register
a growth of 18-20% and maintain a CAGR growth of 17-18% in the coming years. On margin front the company is able to
maintain a margin of 10.5-11%.
Sales through dealer network in FY22 registered a growth of
65%yoy and accounted for 40% of total sales (up from 34% in FY21). Share of dealer network to total sales stood
at 40% in Q4FY22.
Strategy of downscale EPC sales and restrict it to less than
10% of sales taking only higher share of cables with less construction work and
upscaling retail sales will continue.
Total active working dealer of the company as on 31.03.2022
was approx. 1805 Nos. As part of
increasing retail sales, the company have recruited additional 150 marketing
persons leading to strong dealer sales growth in FY22. Expect strong growth
momentum to continue this fiscal as far as retail sales is concerned.
Retail sales (or sales through dealer network) to reach 50%
with annual growth of 30-35% in next 2 years.
Dealer network contribution to sales is expected to reach 45-47% in
FY23.
Change in accounting policy as far as valuation of raw
material is necessitated as new ERP system does not support FIFO method. The
company moved to moving weighted average cost method w.e.f. April 1, 2021 and
this is what the peer industry majors also follows. Its impact on profitability
was minor at Rs 3-4 crore during the quarter.
Capex for FY23 is expected at Rs 150-200 crore and this
includes land cost for new plant.
Capacity Expansion programme update: The company has so far
acquired 35% of total land of 100 acres required. Though the company intend to completed land
acquisition by May 31, 2022, it is getting delayed and take another 2 months to
complete land acquisition. So the company expect the project to get completed
by Q3Fy24. The company through
debottlenecking would improve capacity utilization of its existing plants by
5-7%.
Lower order book size compared to around Rs 3000 crore
earlier was largely due to scale down of EPC business. Earlier the long term
EPC business substantially account for the order book. But now the order
backlog is largely comprised of short term order.
The Enquiry pipeline is strong driven by both government and
private capex. Strong growth in
investments in Oil & Gas including refinery, Solar power projects,
tunnelling and ventilation in Highways as well as Railways and Metro projects.
Similarly the private capex are driven by investments in Solar power, real
estate, PLI scheme projects, Steel, Cement and miscellaneous industries.
Net debt including acceptances stood at Rs 270 crore versus
Rs 407 crore in Q4FY2021.
The working capital cycle currently is less than 3 months
while creditors cycle is just about one month. Expect collection of another Rs
125 crore of receivables. Target is to
reach a receivables period of 2.5 month from current 2.9 months.
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