KEI Industries: 750% return in 3 years, 1,550% in 5, this stock has more steam left

NEW DELHI: This cables manufacturer has been surprising Dalal Street regularly in recent times. The scrip has surged 750 per cent in last three years and a whopping 1,550 per cent over past five years. In the eight months into 2017, the stock is up 130 per cent.

Analysts see more upside in the stock, which may not be as spectacular, but the fundamental drivers are in place to surely drive it higher. This company KEI Industries.

The cable manufacturer itself has given guidance for over 15 per cent volume growth and 20 per cent revenue growth in FY18.

Analysts said over the past couple of years, KEI Industries has increased spend to boost brand visibility, which has been helping it to grow the wires business. The company has built competencies in the EPC division, which has swelled its EPC order book.

Besides, the company has been expanding its cables capacity to address benign growth prospects across HT, LT & housing cables segments.

Edelweiss Securities said rising potential of the B2C business, which accounts for 30 per cent of the company’s sales, has scope to generate cash over the next 12-24 months.

“This may help KEI prune long-term debt from Rs 160 crore at present. While expanding the B2C network in cables, the potential for debt reduction and brand building would be the near-term and medium-term triggers, while scope for expanding the product portfolio compatible with expanding distribution can be a strong option value,” the brokerage said.

IIFL Wealth Management in a note said the company has been focusing on order executions and started bidding for fresh orders, with the management expecting Rs 500-600 crore worth of orders over the next 4-5 months.

Equirus Capital expects the company to benefit from rising government spending on infrastructure schemes such as DDUGJY, IPDS and UDAY.

“We expect LT/HT/EHV/HW/EPC business segments to grow at a CAGR of 9 per cent, 9 per cent, 49 per cent, 14 per cent and 25 per cent, respectively, during FY17-FY20E, with combined revenues growing from Rs 2,535 crore in FY17 to Rs 3,831 crore in FY20E,” the brokerage said in a July note.

Edelweiss said KEI has strengthened its position in North India while maintaining focus on profitability over the past two to three years.

“High potential for profitable growth in cables & wires and scope for significant rampup in distribution renders KEI our preferred pick in the India consumer electrical space,” it said.

The brokerage has a target of Rs 322 on the stock. IIFL Wealth Management has a target of 288. The scrip traded 1.3 per cent higher at Rs 262.80 on Thursday.

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