KEI Industries margin expansion and Sanand capacity build strengthen growth visibility

Investment View and Valuation

Motilal Oswal Financial Services Ltd. (MOFSL) retained its Buy recommendation on KEI Industries following the company’s 1QFY27 results. The quarter was stronger than the broker’s expectations, principally because Cables and Wires (C&W) margins were higher than estimated.

MOFSL remains positive on KEI Industries because of its execution, favourable industry conditions, improving margin profile and capacity-expansion programme. The broker expects the company to benefit from structural growth opportunities in the cables and wires industry.

MOFSL largely maintained its FY27 and FY28 earnings estimates. It values KEI Industries at 45 times FY28E EPS to derive a target price of Rs 6,630. The report notes that the stock was trading at 47 times FY27E EPS and 37 times FY28E EPS.

1QFY27 Financial Performance

KEI Industries reported 1QFY27 revenue of Rs 31.9 billion, up about 23 per cent year on year and broadly in line with MOFSL’s estimate. EBITDA increased about 53 per cent year on year to Rs 4.0 billion, approximately 7 per cent above the broker’s estimate. Operating profit margin rose 2.5 percentage points year on year to 12.4 per cent, which was 1.1 percentage points above MOFSL’s expectation.

Adjusted profit after tax rose about 40 per cent year on year to Rs 2.7 billion and was broadly in line with the estimate. Depreciation and interest costs increased about 44 per cent and 22 per cent year on year, respectively, while other income declined roughly 51 per cent.

Segment Performance

C&W revenue rose about 25 per cent year on year to Rs 30.9 billion in 1QFY27. C&W EBIT increased about 57 per cent to Rs 4.2 billion, while its EBIT margin expanded 2.8 percentage points to 13.6 per cent.

EPC revenue grew about 32 per cent to Rs 1.3 billion, but the segment posted a loss of Rs 51 million versus profits in 1QFY26 and 4QFY26. Stainless steel wires revenue grew about 3 per cent to Rs 536 million; segment EBIT grew about 16 per cent to Rs 49 million and margin improved 1.1 percentage points to 9.2 per cent.

Cash and bank balance, net of acceptances, stood at Rs 2.85 billion at June 2026, compared with Rs 5.92 billion at March 2026.

Growth Outlook and Capacity Expansion

Management remained confident of delivering more than 20 per cent medium-term growth, supported by demand in domestic and export markets. The pending order book increased to Rs 42.9 billion from Rs 35.9 billion at March 2026.

Capacity utilisation in 1QFY27 was about 72 per cent in cables, 61 per cent in house wires, 91 per cent in stainless steel wires and 45 per cent in communication cables.

The Sanand facility is ramping up and is expected to contribute about Rs 15–20 billion of revenue in FY27 and about Rs 40 billion in FY28, when utilisation is expected to reach about 70–75 per cent. KEI Industries incurred Rs 1.8 billion of Sanand capex in 1QFY27, taking cumulative project capex to Rs 17.2 billion at June 2027, and planned another Rs 3.0 billion in the remaining nine months of FY27.

Management expects annual capex of Rs 6.0–7.0 billion over the next three to four years, including the Rs 7.0 billion Salarpur greenfield facility, mainly to expand LV/MV cable capacity.

Margin Profile and Product Mix

Management indicated that EHV cable margins are about 15 per cent, compared with about 10.5 per cent for institutional LV/MV power cables, about 11 per cent for retail sales and above 11 per cent for exports. It guided for a sustainable operating margin of about 11–12 per cent, aided by operating leverage, product mix, retail mix and better-margin exports.

MOFSL Earnings Forecasts

MOFSL forecasts total revenue CAGR of about 21 per cent over FY26–28, led by about 23 per cent C&W growth and about 7 per cent stainless steel wires growth. EPC revenue is forecast to decline about 8 per cent annually over the same period.

Key Monitorables

• The EPC segment loss in 1QFY27 remains a less favourable element within the forecast mix.
• MOFSL’s projected decline in EPC revenue is another less favourable factor in its estimates.
• Execution at the Sanand facility, capacity utilisation and the planned expansion of LV/MV cable capacity remain important to the growth outlook.