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.