Defying the broader market weakness in Tuesday’s trade, shares of KEI Industries surged 9% to hit a four-week high of ₹5,475 apiece after the company reported better-than-expected June quarter results, driven by a favourable revenue mix and operating leverage.
The company reported revenue of ₹3,190 crore for the June quarter, registering a 23% year-on-year (YoY) growth.
While the topline remained robust, the performance implied only low-single-digit volume growth, given the sharp rise in input costs and the relatively muted volume trends reported by peers such as Polycab, Havells and RR Kabel, according to brokerage firm JM Financial.
At the operating level, EBITDA jumped 53% YoY to ₹400 crore, while the EBITDA margin expanded 240 basis points to 12.4%, driven by operating leverage and an improved product mix.
On the bottom line, the company reported a net profit (PAT) of ₹270 crore, up 40% YoY. However, profit growth lagged EBITDA growth due to lower other income during the quarter.
Following the strong margin performance, brokerage firm JM Financial believes there is a high probability that the company may raise its FY27 EBITDA margin guidance of 10.5%–11%.
The brokerage also highlighted that the dealer and distributor channel continued to be a key growth driver, contributing around 59% of total revenue during the quarter, compared with 51% a year ago.
Revenue from this channel surged 42% YoY to ₹1,880 crore. Since sales through dealers and distributors typically carry higher margins, the improving channel mix is expected to support profitability going forward.
The company also announced a ₹700 crore capacity expansion at its Salarpur facility to add 50,000 km of cable manufacturing capacity and 40,000 metric tonnes of GI wire capacity.
The project will be commissioned in phases and is expected to be completed by the second quarter of FY29. As of the end of the June quarter, capacity utilisation stood at around 72% for cables, 45% for communication cables, 61% for house wires and winding wires, and 91% for stainless steel wires.
What are brokerages saying after the Q1 results?
Following the June quarter results, JM Financial reiterated its ‘Buy’ rating on KEI Industries with a target price of ₹5,800. The brokerage believes the company’s stronger-than-expected EBITDA margin performance increases the likelihood of an upward revision in its FY27 margin guidance.
It also expects margins to expand further in FY28, supported by the commissioning of the extra-high voltage (EHV) cable facilities by the end of FY27.
Meanwhile, Motilal Oswal also maintained its ‘Buy’ rating on the stock with a target price of ₹5,010. However, the stock is currently trading higher than the target.
The brokerage noted that KEI’s Q1 FY27 EBITDA exceeded its estimates, driven by strong revenue growth in the Cables & Wires (C&W) and Engineering, Procurement & Construction (EPC) segments, although the EPC business reported a loss during the quarter.
Motilal Oswal added that it remains structurally positive on the C&W sector, citing strong long-term growth drivers and continued demand tailwinds.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
