KEI Industries shares recover from Q1 earnings shock; buy, sell or hold?

Shares of KEI Industries Ltd recovered today, a day after reacting to their Q1 earnings. The stock gained 4.69% intraday to Rs 2377 today against the previous close of Rs 2270.40 on BSE. Market cap of the firm rose to Rs 21,293 crore. In a year, the stock has delivered returns of 82.12% and risen 59.70% this year. Total 0.44 lakh shares changed hands amounting to a turnover of Rs 10.30 crore on BSE. KEI Industries stock hit a 52-week low of Rs 1241.40 on August 2, 2022 and a 52 week high of Rs 2812.20 on July 19, 2023.   

In terms of technicals, the relative strength index (RSI) of KEI Industries stands at 39.1, signaling it's trading neither in the overbought nor in the oversold territory. KEI Industries stock has a one-year beta of 0.6, indicating very low volatility during the period. KEI Industries shares are trading higher than the 50 day, 100 day and 200 day but lower than the 5 day, 10 day, 20 day, 30 day moving averages.       

In the last session, KEI Industries stock closed 7.01% lower at Rs 2270.40 after the June quarter earnings were announced.  

Net profit for Q1 came at Rs 121.38 crore against Rs 103.76 crore in the same period of fiscal year 2023.  

Revenue rose to Rs 1,790.90 crore for the first quarter ended June 30, 2023, as compared to Rs 1,568.94 crore a year ago. Profit before tax climbed 16.42% to Rs 163 crore in the June 2023 quarter against Rs 140 crore in the June 2022 quarter.    

EBITDA margin in the June quarter rose to 10.47% as against 10.42% YoY. PAT margin in the June quarter has increased to 6.81% as against 6.63% YoY.  

EBIDTA during Q1 came at Rs 186.60 crore against Rs 163.16 crore against the same quarter in the previous year.  

Nuvama Institutional Equities has assigned a target price of Rs 2650 on the stock.  

“Given very strong demand for cables (also indicated by KEI) and with capacity expansion that KEI is executing, we expect its revenue to double over five years. Raising the target PE to 32x (from 27x) and rolling over to Q1FY26E lifts our target price to Rs 2,650 (from Rs 2,130); ‘BUY’, said Nuvama. 

Praveen Sahay, Research Analyst, Prabhudas Lilladher has assigned a hold rating to the stock with a target of Rs 2,319.  

“Management expects Rs 100 bn revenue by FY26 with EBITDA margin target of 12-12.5%. We tweak our earnings estimates for FY24/FY25E and estimate Revenue/EBITDA/PAT CAGR of 18.0%/23.4%/24.5%. Maintain ‘HOLD’ at TP of Rs 2,319 (unchanged),” said Sahay.  

KEI Industries is engaged in the business of manufacturing, sale and marketing of all range of power cables up to 400kV - Low Tension (LT), High Tension (HT) and Extra High Voltage (EHV), Control and Instrumentation Cables, Specialty Cables, Elastomeric/Rubber Cables, Submersible Cables, Flexible and House Wires, Winding Wires. KEI is also engaged in execution of Engineering, Procurement and Construction projects (EPC) for survey, supply of materials, design, erection, testing & commissioning on a turnkey basis.   

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