Kei Industries Q4FY17 Concall Summary

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Financial Highlights

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  • Net sale in Q4FY17 were at 746 Cr ; operating profi tat 80.86 Cr and  operating margin at 10.84%
  • PAT in Q4FY17 was at 31.62 Cr an  increase of 55.84% against Q4FY16 while PAT margin came in 4.24%
  • Growth in sales against Q4FY16 was up at 17%
  • Net sales in FY17 was at 2669 Cr, EBITDA at 10.67 Cr while  PAT was at 98.63 Cr
  • Growth in sales against FY16 is 15% while Growth in EBITDA against FY16 is 15%
  • In FY17, export sales have grown by 96% to 375 Cr
  • Net sales through dealer network has improved 13% to 813 cr. and 15% in terms of volume. The total number of dealers have improved to 114
  • The financial costs have reduced to 123 crores from 127 crores in FY16
  • Total pending orders are 2783 Cr out of which EPC is 2000 Cr and EHV cable is 200 Cr
  • The segmental wise revenue breakup in cr. is shown below:-
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Orderbook

  • EPC orderbook is close to 2000 cr. in which 1817 cr. comes from EPC and the remaining 177 cr. belongs to service station business
  • Order intake in the EPC business comes roughly around 200-300 cr. and the problem is execution owing mainly due to demonitisation and U.P elections
  • Company expects order inflow in EPC to be around 1500 cr. because of its focus on execution and not taking further orders to maintain.
  • Geography-wise, the orderbook remains the same with 75% coming from U.P and the remaining mainly from Goa and Himachal Pradesh
  • Company is actively bidding in all the states so as to minimise political risk.
  • Company has already started recognising profits as per the appropriate completion in projects so as to ensure smoothening in profits.
  • Earlier, it used to recognise profits only if more than 25% was completed
  • Under IDPS scheme, most of the states have come out with tenders for Phase 1 and U.P has already placed orders last year and awarding contracts tendering has begun.
  • Total ordering under IDPS is 6000 Cr  while under DDU scheme is 11000 Cr

Working Capital

  • The receivables have increased significantly over FY16 mainly because of the increase in retention money ofr EPC and increased sakes of cable division in Feb. And Mar
  • Company expects the working capital to remain the same because it has got around 50 cr. from EPC division as result of the U.P. elections
  • There is a rise in capital employed mainly due to the funds released by the central government which has resulted in payments not getting delayed from PEC and REC
  • In cable business, debtors has grown only due to rise in sales.
  • Increased receivables over FY16 is 144 Cr out of which EPC is 86 Cr and cable at 59 Cr
  • Company expects the receivables to increase to 825-850 cr. by next year.
  • Company expects the days in receivables in the cable segment to go down from 30 days to 20 days because of increase in the company’s channel financing
  • The working capital cycle in exports which is expected to grow at 10-12% is 75 days.

Financial Costs

  • The company expects the credit rating of the company to improve which can reduce interest costs on account of expected decrease in working capital in the future
  • The financial costs have decreased due to lower utilisation of working capital and lower interest rate which is 11.45%.
  • The interest expense breakup is as follows:-
Kei Ind Q4FY17 Interest expense breakup.png

EHV segment

  • Company expects to do around 275 cr. to 300 cr. of EHV sales
  • Company expects to achieve 20%+ growth in revenues in this segment.

Debt

  • There has been a sharp increase in short-term debt from 141 cr. to 51 Cr
  • This is because debt includes bad credit which is part of creditors.
  • Company expects total debt reduction with 50 Cr worth term loan paid every year.

Expansion/Future Outlook

  • Company expects 13-15% growth in LT and HT despite HT having a 12% decline yoy.
  • This is mainly due to production suffering in the Chopanki plant due to installation of new machinery and reconstruction of the building.
  • Company has a 10-15% bid success rate in the tenders
  • Company has 1500 cr. of order in the EPC division in the next year
  • Company expects 20% growth in the house wire division which might be more if the real estate sector improves
  • Company does not foresee any impact due to pricing of commodities such as copper because it has 75 days of inventory and there is a balance between inventory and orders booked
  • Company has no capex planned for FY18 and 15-20 cr. of capex is planned to increase operational efficiency
  • Major capex plans will be drawn in the later months of the year
  • Company expects to grow a lot in the metro business which contributes 7-8% of the business because of metros coming up in various cities
  • Company is growing in the railways segment and expects capex. In railways to go up

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