KEI Industries is a beneficiary of favourable government policies and power sector reforms

Stock to buy: KEI Industries gave 59% returns last year; should you invest now? The company offers a wide product range, exporting to over 60 countries. Serving industries like power, oil & gas, railways, and cement, it reaffirms a 15-17% revenue growth for 2024-25, driven by a strong order book and capacity expansions

KEI Industries: The manufacturer of electrical wires and cables (W&C) reported a decent performance in the September quarter with revenue and PAT growth of 17% and 10% year-on-year respectively. The performance was aided by robust domestic demand. However, the numbers missed the Reuters-Refinitiv estimates by 0.8% and 7.2% respectively amid a significant contraction in EPC revenue and a decline in margins due to volatility in raw material costs.

The company offers a wide product range, exporting to over 60 countries. Serving industries like power, oil & gas, railways, and cement, it reaffirms a 15-17% revenue growth for 2024-25, driven by a strong order book and capacity expansions.

It benefits from strong global and domestic W&C industry prospects. Infrastructure upgrades, grid expansions, IT growth, and demand for flexible, fire-resistant wires are driving the global C&W industry.

On the other hand, favourable government policies, reforms in the power sector, growth in industries like real estate and electric vehicles and increasing investments in transportation infrastructure are driving the domestic demand for W&C. Furthermore, the shift to renewable energy sources including solar and wind power is providing an additional impetus to both domestic and global demand for W&C. The company’s 2023-24 annual report estimates global W&C industry to grow at a CAGR of 9.1% from 2024 to 2032, reaching $547.1 billion by 2032. The management took various strategic initiatives in the recent past, which aided the performance momentum. Strengthening the distribution base, focus on the retail segment, increasing the number of dealers, emphasis on improving relationships with channel partners through digitalisation initiatives and targeted marketing to boost brand equity are some of such initiatives. To improve its international business, the company developed a wide network of agents and marketing channels and obtained countryspecific certifications.

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It has also accelerated its capex plan to meet the growing demand and maintained capex guidance of Rs.900-1000 crore for 2024-25. The brownfield capacity expansions at Pathredi and Chinchpada plants have been completed in the first half of 2024-25 whereas commercial production at the greenfield expansion in the Sanand plant is expected from the first quarter of 2025-26. The board has also approved a QIP of Rs.2,000 crore to fund its capex (Sanand plant) and working capital requirements. It has generated strong free cash flows in the last few years, which has supported debt reduction and strengthened the balance sheet. The proposed QIP will help the company to remain debt-free. The stock has significantly outperformed the market benchmark in the last one year with 59.1% returns compared to BSE Sensex with 24% returns.

Selection methodology: We pick the stock that has shown the maximum increase in ‘consensus analyst rating’ during the past three months. The consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (1 for strong buy, 2 for buy, 3 for hold, 4 for sell, 5 for strong sell). An improvement in consensus analyst rating indicates that the analysts are getting bullish on the stock. Only stocks with more than five analysts covering them are considered. You can see similar consensus analyst rating changes during the past week in ETW 50 table.

This story originally appeared on: India Times - Author:Faqs of Insurances