KEI Industries hosted a
conference call on Aug 1, 2023. In the conference call the company was
represented by Anil Gupta, CMD.
Key takeaways of the call
Demand environment continue to be
strong led by infrastructure especially solar, wind and other infra projects
such as metro, ports and airports etc. Industrial
demand too is good especially with increasing private investment in energy
intensive sectors such as steel, cement etc. Demand from residential realty projects is
also good with rising household income.
Order book of the company as end
of June 2023 is Rs 3567 crore of which exports is Rs 236 crore.
Demand environment was strong but
capacity constraint limited the growth of the company in Q1FY24.
Domestic institutional EHV sales
stood at Rs. 50 crore (down 51% y-o-y) due to capacity constraints.
Sales through Dealer/
Distribution contributed 44.64% of overall sale in Q1FY24 as against 41.65% in
Q1FY23.
Margin in Q1FY24 was impacted as the company has
spent Rs 10-12 crore of advertisement expenses during IPL 2023, which was not
there in corresponding last quarter. The
company have not done any Television commercials during last year IPL. For full
year FY24 the advertisement and promotion expenses will be about Rs 35
crore.
Expect a revenue growth of 16-17% for FY24 and the CAGR revenue growth of 17%
is expected for next 10 years. Export sale
of EPC and SS Wire were Rs 42 Crore ( Rs 23 crore in Q1FY23) and Rs 27
crore (vs. Rs 31 crore in Q1FY23) respectively.
Export institutional cable sale
is Rs 238 crore (up 23.59%YoY). Exports contributed about 17% of Q1FY24 revenue
and the company continue to expect this kind of contribution from exports for
full year. The industry is gaining out of china plus one sourcing strategy of
developed nations. Contribution of exports in FY23 was about
10%. Export margin is 1% higher than domestic
margin. The growth is coming from existing customers and existing geographies
as well as new geographies.
Net cash (net of gross debt,
C&B and acceptance) as end of Jun 30,
2023 is Rs 24 crore against Rs 180 crore in Q4FY23. C&B balance and acceptances
were Rs 305 crore and Rs 151 crore respectively as end of Jun 30, 2023. Gross debt is Rs 135 crore completely of channel
finance of Rs. 135 crore. The company
will remain as Debt free company as the company will meet its capex and WC
requirement from internal accruals.
Other income includes interest
income of Rs. 5.9 crore.
For CY and next fiscal the EBITDA
margin will be around 11% and it will increase by 1-1.5% thereafter. In FY25-26 the company will reach an EBITDA
margin of 12-12.5%.
Volume growth in W&C in terms
of cables and wires consumption in Q1FY24 stood at 22% y-o-y, largely led by
strong volumes in wires. The absolute revenue growth was restricted to 14% due
to decline in realizations. The company
has guided for 20% y-o-y volume growth in FY24.
The company can clock a revenue
of Rs 9400-9500 crore with current capacity and profit capex.
Major copper and aluminum are
used domestic and small quantity is imported.
The company would undertake a
brownfield capex of Rs. 45 crore in its Silvassa plant for increasing capacity
of LT power cables in FY24. This shall help the company earn revenue of Rs. 500
crore and enable 16-17% revenue growth in FY24. KEI has already spent Rs. 114
crore in FY24. The company is doing greenfield expansion in its Gujarat plant
and production would commence in 18 months from the end of September/December 2024.
The company plans to undertake Rs. 300-350 crore capex p.a. in the next three
years to achieve a 17-18% revenue CAGR in the long term.
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