KEI Industries shares bounce back after 5-day fall; should you buy or wait?

KEI Industries shares surged on Tuesday, in a rebound after five consecutive sessions of losses, riding on the back of strong management commentary and outlook. The stock of KEI Industries—a New Delhi-based manufacturer and supplier of electrical wires and cables—gained by Rs 142.8, or 5.9 per cent, to touch Rs 2,558 apiece at the strongest level of the day before settling with a gain of 3.8 per cent at Rs 2,507.2 apiece on BSE. 

According to Prabhudas Lilladher, which recently met with the cable maker's top brass, KEI Industries' management sees growth momentum in the company continuing going forward, as it expects to maintain revenue growth at 16-17 per cent and margin at 11 per cent, citing a strong demand outlook in areas such as infrastructure and data centres.

The brokerage upgraded KEI Industries to 'buy' from 'hold' and raised its price target by Rs 589 to Rs 2,908, suggesting an upside of 20.4 per cent from Monday's closing price.

Prabhudas Lilladher values the KEI Industries stock at a multiple of 33 times its estimated earnings per share (EPS) for the year ended March 2026. It is positive on KEI Industries with a long-term view owing to the following main factors: 

• Focus on diversification of product portfolio and de-risking business
• Scaling up of the distribution network
• A healthy balance sheet with net cash of Rs 400 crore as of March 2023
• A strong order book of Rs 3,570 crore across cables, and domestic export EPC businesses

Analysts at the brokerage expect the company's net profit and revenue to grow at compound annual growth rates (CAGRs) of 21.3 per cent and 16.7 per cent over the FY23-FY26 period, respectively. They expect growth across segments to lead to revenue growth to the tune of 24.4 per cent for the company in the year ending March 2024.

The company has a strong order book of Rs 3,567 crore, and the company intends to remain debt-free in the future, and utilise its cash for capacity expansion as well as its working capital requirements.

Meanwhile, Zee Business analyst Ashish Chaturvedi has a 'buy' call on KEI Industries from a fundamental perspective. He suggests going long on the cable manufacturer's stock for a target of Rs 2,600 with a stop loss at Rs 2,390. Check out his other recommendations

KEI Industries shares: Past performance

KEI Industries shares have rewarded investors with a return of 67.5 per cent so far in 2023, sharply outperforming an 8.2 per cent rise in the headline Nifty index. The cable maker's stock finished 2022 with a gain of 25.4 per cent while the Nifty rose 4.3 per cent. 

Here's how KEI Industries fared in Q1

KEI Industries reported a 16 per cent year-on-year jump in net profit to Rs 121 crore for the quarter ended June 30, 2023.

Its revenue for the first quarter of the current financial year grew 14 per cent to Rs 1,783 crore while its operating margin held on to double-digits, at 10 per cent, according to a regulatory filing. 

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