Capacity constraints are an issue however in my 6 year holding of KEI industries I have never heard management guide more than 17-18% revenue growth. The do have higher internal targets but guidance is always conservative.
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KEI was trading at 22x FY25 P/E in May 23, now trading at 40x 1 yr forward, though multiple rerating back then was warranted for its consistency and industry tailwinds, i find limited upside to multiples now. Plus post elections there might be some hickups in demand. Only positive being booming exports for the sector
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You are suggesting that its overheated and should be sold for time being?
A lot of the run-up has also happened post the IT raids on Polycab. A quarter ago, when KEI underperformed Polycab, it dropped a lot (~2800 to 2300?). We have the Polycab results in 2 weeks along with more clarity I expect on the IT raids - would like to see how KEI reacts then. As of now for a pure C&W business with lower growth expected vs peers and no FMEG optionalities, valuations seem extremely high.
How are you determining that the valuation is high based on which parameters?
Based on the historical valuations for the sector, i think what happens in almost all sectors is extrapolation of earnings to future years based on 1-2 years performance. Volume growth of 25-30% for cables and wires for last 2 years has been kind of extrapolated by the street going forward which i dont think is sustainable. The effect is already visible in wires, with Havells Q2 revenues for cables and wires where house wires is a dominant mix has grown at best at low double digit growth and they are seeing slowdown in demand.
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Very well said Raj. The valuation is too high. Management guides for 17-18% but re-rating event is at extremly high.
KEI management always give lower guidance and over delivers. Can be seen in past concalls. KEI will grow at 25-30%.
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It’s a blessing in disguise with valuations of good cable wire companies may reduce a bit.
This is because the PIB news didn’t name any company.
The media release of Ministry of Finance mentions that a distributor caught in the wrong doing exclusively sells Polycab products. If this is true, it means it is Polycab
Kindly share the link of that news please if you have
It’s not like that, everyone knows IT raid was conducted on Polycab premises in December, so it’s obvious which company it mentions. There haven’t been IT raids on KEI, else they would have sent a circular as well.
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KEI Industries LimitedQ-3 FY 2024
During the Q3 FY 24 Net Sales was 2061.72 Crore, against same quarter in previous year of 1784.32 Crore
EBIDTA during this Quarter was 228.72 Crore against same quarter in the previous year of 195.94 Crore.
Revenue improved by 15.55% YoY in this quarter.
EBITDA margin in this quarter has improved to 11.09% as against 10.98% YoY.
PAT margin in this quarter has improved to 7.31% as against 7.21% YoY.
Order book is approx. 3,826 Crore.
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Q3 further important updates based on the Chairman call with CNBC TV18
- Improvement in EBITDA margin by 300 bsp to 11%
- Increase in exports by 100% compared to YOY
- Current/FY 24 export mix is 12%, Target to reach exports at 20% of total revenue by FY 27. Exports are a high margin business.
- Housing wire growth of 23%, better than competitor. but over the full year it will not be more than 20%
- EHV full year forecast will be around 500-600 Crs.
- Capex FY 24 - 500 Crs & FY 25 - 600 - 700 Crs, Capacity will increase in phases, full effect in next 24 months.
- KEI Margins at 11% where as Polycab Margins at 14%, Reason for higher margins for Polycab can be larger scale of operations and efficiencies because of which and better logistics.
- KEI can see reaching 11.5% by FY 25, and may touch 12.5% to 13% margins by end of FY 26.
Top 5 Electrical Wire Manufacturers in India - Nov 23 data
Polycab India: 20-22% market share
Havells India: 15-17% market share
Finolex Cables: 12-14% market share
KEI Wires & Cables: 10-12% market share
RR Kabel: 8-10% market share
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Data is wrong. KEI is bigger than havells
Can You put correct data?
data is available in screener website.