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.