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Buy This Multibagger Mid Cap Industrial Stock For A Target Price of Rs. 1,300: Sharekhan

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The company, which is headquartered in New Delhi, India, provides a wide range of cable services. Extra-High Voltage (EHV), Medium Voltage (MV), and Low Voltage (LV) power cables are all manufactured and marketed by KEI Industries Ltd. Through a vast network of 5000+ channel partners, the company's products reach clients in over 45 countries. The company's stock has risen 110 per cent in a year and 189 per cent in the previous three years, indicating a multibagger return. Following KEI's Q4FY22 earnings, brokerage company Sharekhan has given the stock a buy call rating with a target price of Rs. 1,300.

 

Q4FY22 results

Q4FY22 results

The brokerage has said "KEIs' Q4FY22 results beat ours and the street's expectations, barring a miss on the OPM front. KEI's standalone revenue growth of ~44% was primarily led by robust growth of ~52% in cables segment owing to strong B2B sales, while the volumes grew at a healthy pace of ~20% y-o-y during the quarter. Rise in commodity costs and inflationary pressures weighed on profitability as OPM declined by ~140 bps to 9.6% (vs our estimate of 10.6%). EBIT margin declined in Cables segment to 8.1% (vs9.8% in Q4FY21), while turnkey projects segment clocked margin of 11.9% (vs7.8% in Q4FY21) despite decline of ~16% in sales."

According to Sharekhan "The decline in turnkey (EPC) sales is in line with the company's strategy to reduce EPC revenue share. Net profit grew by ~35% y-o-y to Rs 116crore (beating our estimate of Rs 97crore) led by strong revenues and higher other income. The management targets to grow its revenues at 17-18% CAGR (retail to grow at 25-30% p.a.) over the next three years. The company would be undertaking greenfield expansion in the cables segment at an investment of ~Rs. 800 crore (land acquisition to be done in next couple of months- first phase by 2024E) to maintain high-growth trajectory."

Buy for a target price of Rs 1300
 

Buy for a target price of Rs 1300

Sharekhan has claimed in its latest report that "KEI's growth outlook is expected to be positive with its diversified user industries, increased focus on retail, high-margin EHV cables business and export sales along with a focused-industry approach as well as utilization-driven capex plans. These are likely to help in sustaining a strong growth trajectory. An uptick in housing demand bodes well for KEI given its increased focus on brand-building, distribution expansion & increasing B2C sales. Further, institutional segment is also expected to do well on account of increase in government and private capex. The stock is currently trading at a P/E of ~18x its FY2024E EPS, thereby leaving further headroom for upside. Hence, we maintain a Buy on the stock with an unchanged PT of Rs. 1300."

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.

Read more about: stocks to buy
Story first published: Wednesday, May 11, 2022, 17:05 [IST]
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