KEI Industries Ltd - Rs 28.00

Founded in 1968, KEI Industries Ltd (KEI) is a complete cable solutions company with the widest product range encompassing high tension and low tension power cables, control and instrumentation cables, rubber cables, flexible & house wires, submersible cables, OVC/poly wrapped winding wires, and stainless steel wires etc. It is also one of the few companies in country to manufacture speciality cables including braided cables, fire survival and Zero halogen cables. Infact, KEI has been ranked among the top three cable manufacturing company in India. It has the capabilities to address demand across a cross-section of sectors such as power, oil refineries, railways, automobiles, cement, steel, fertilizer, textile, real estate and retail segment. Company derives major revenue thru institutional sales to industry stalwarts like L&T, BHEL, NTPC, ABB, Alstom, Jindal’s, Tata’s, ADAG group, GAIL, Suzlon, SAIL, Power Grid, various state electricity boards, ONGC to name a few. Of late KEI has started focusing on lucrative retail segment as well thru aggressive advertising and marketing of house wires & flexible wires. From last fiscal company has also ventured into power EPC segment (Engineering, Procurement and Construction) and has already been awarded break through orders. To execute, it has set up an exclusive EPC division and hired key manpower to scale this new business multifold in next couple of years.

Currently, KEI has four manufacturing facility spread across Delhi, Silvassa, Bhiwadi (Rajasthan) & Chopanki (Rajasthan) with combined installed capacity of 47000 km of LT cables, 3000 km of HT cable and 25000 km of house wire. Incidentally, company commissioned its Chopanki plant, a 100% Export Oriented Undertaking (EOU), last fiscal only with an installed capacity of 10,000 kms of LT power cable. KEI has been exporting its products to Canada, South Africa, Australia, USA, France, Italy, Germany, USA, Italy, UK, Abu Dhabi, Malaysia, Mauritius, Sri Lanka, etc and recent EOU unit has given a further boost to export segment. On the back of robust demand, all the plants are working at 100% capacity utilization and moreover company is having an all time high order book position of more than Rs 400 cr. To cash on the buoyancy in the industry, KEI is undergoing expansion of LT cable by 7000 km at Bhiwadi plant and is also adding 1500 kms of HT cable capacity at Chopanki unit. The expansion project is near completion and is expected to commence production shortly. Further it is upgrading the HT cable capacity up to 132 kV, of which testing of 66 kV has been already successfully completed. To widen its product range, KEI is considering a technical collaboration or a joint venture for the Extra High Voltage (EHV) cable project. The EHV cables will receive excellent boost as massive demand exists from the underground cabling as cities across the country move from overhead cabling to underground cabling options.

KEI's focused advertising campaign has not only helped it to increase the visibility, increase retail sales but also helped it to further strengthen its dealer network and increase the number of vendor approval status from contractors to ensure repeat sales. The management is confident of expanding the export market, retail market and EPC segment besides maintaining the sales momentum to institutions. They have taken active steps to grow the export market presence by increasing the international marketing team's size, participating in international fairs and exhibitions, filing for certifications to sell in new geographies and strengthening of marketing office in Dubai. For FY08 it recorded 45% growth in sales to Rs 875 cr and nearly 10% rise in net profit to Rs 43.50 cr posting an EPS of Rs more than Rs 7 on equity of 12.20 cr. In FY07, company had raised around Rs 150 cr via FCCB which can be converted into equity @ Rs 81 per share. Out of the 7200 bonds, only 670 bonds have been converted till date and the chances of balance 6530 bonds getting converted is bleak considering the CMP. Although KEI has been reporting lower profit margin for last two quarters due to increase in raw material and other expenditure, still it is expected to clock a turnover of Rs 1200 cr and PAT of Rs 45 cr for FY09. This translates into EPS of more than Rs 7 on current equity. Despite higher interest cost & high debt equity ratio, KEI is trading fairly cheap at current enterprise value of around Rs 500 cr. Investors are advised to buy at current levels as share price can easily appreciate 50% within a year.

Click here to download Report (PDF)