KEI Industries Ltd Q2 FY2024 Concall Summary

Key Takeaways

• Steady, capacity-constrained quarter: Revenue crossed ₹2,000 crores with volume growth of ~26%, while management reiterated a deliberate 16%–17% growth ceiling to stay debt-free.
• EHV and exports rebounded sharply: EHV cable sales hit ₹169 crores after a weak Q1, and export sales surged ~79% to ₹249 crores as the company diverted capacity to international markets.
• Margins are inching up on operating leverage: EBITDA margin improved and management expects to maintain a 10.75%–11% range, with a further 1%–1.5% expansion targeted by FY27–28 as new capacities come online.
• Capex cycle is accelerating: Brownfield spend at Chinchpada was more than doubled to ₹110 crores, and the Sanand greenfield has broken ground with Phase 1 commercial production expected by Q4 FY25.
• What to watch next quarter: Whether the EHV recovery sustains at the guided ₹550–₹600 crores full-year run rate, the pace of export order conversion from new geographies, and any margin impact from the stainless-steel price volatility.

Growth Strategy & Capacity

• Self-funded, debt-averse model: Management caps growth at 16%–18% irrespective of market opportunity, deploying only internal accruals to avoid debt; the last 15 years delivered a 14% CAGR with debt, and the company now projects the same trajectory debt-free over the next 10–15 years.
• Capacity additions are staggered and deliberate: Chinchpada's October addition of ₹240 crores per annum is already online; the expanded brownfield capex (₹110 crores) will add ₹800–₹900 crores of house wire and LT power cable capacity, with LT cable utilization expected immediately given the order book.
• Greenfield pipeline is long-dated: Sanand Phase 1 (~₹2,000 crores capacity) targets Q4 FY25 commercial production; Pathredi (Bhiwadi) at ~₹110 crores goes live by May/June 2024. Annual capex of ₹300–₹400 crores is planned for the next 2–3 years.
• Portfolio balancing insulates growth: The company rotates across domestic institutional, international export, and dealer/distribution segments; no single segment is expected to grow uniformly every quarter, which management argues enables sustainable 16%–18% compounding.

Rajeev Gupta: "Even though the market is there, if we target for 25% to 30% growth, then what will happen, we will again end up with the debt position, which we don't want."

EHV & Export Recovery

• EHV snapped back after Q1 delays: Q1 dispatches were held up by customer-side right-of-way issues; Q2 delivered ₹169 crores, and the full-year guidance of ₹550–₹600 crores was confirmed unchanged.
• End-client mix is balanced: High-voltage cable demand splits roughly 50% government (state and central transmission utilities) and 50% private (data center developers, solar power evacuation).
• Exports are taking share from domestic dealer cables: Export sales jumped ~79% to ₹249 crores as the company diverted cable capacity to international markets, which sometimes suppresses dealer/distributor cable growth.
• Geographic expansion is the export engine: A strengthened marketing team has added countries and customers post-COVID; the US is spending on power distribution and infrastructure with insufficient domestic cable manufacturing capacity, while the China Plus One policy by Europe and the US provides a structural tailwind.
• Near-term export ambition: Management aims to grow exports to 15%–17% of total sales within the next year or two, and expects a breakthrough in Saudi Arabia soon.

Anil Gupta: "It is mainly because in the first quarter, some cable manufacturers could not be dispatched due to non-player from the customers due to ROW issues, but with significantly healthy trend in the EHV cable in the coming quarters."

Demand Drivers

• Industry growth has ticked up: Wire and cable industry demand improved from 11%–12% to 12%–13%, fueled by government infrastructure capex (roads, rail, metro, airports, seaports), affordable housing, power generation across solar, wind and thermal, the PLI scheme attracting manufacturing, and private capex from overseas.
• House wire is a standout: The segment is growing 20%–25% on expanding geography, deeper retailer penetration, real estate demand in top metro cities over the last 1.5 years, and individual bungalow construction across cities and towns.
• Smaller players are structurally disadvantaged: Management argues that smaller competitors cannot participate in industry growth due to management bandwidth constraints and capital scarcity, creating a consolidation opportunity for scaled players.
• No domestic slowdown sensed: The company sees sufficient demand and is balancing growth against available capacity rather than chasing market share.

Margins & Profitability

• Operating leverage is the margin story: EBITDA margin improvement this quarter was attributed to top-line increase flowing through; management expects to maintain EBITDA in the 10.75%–11% range.
• Medium-term margin target is explicit: At least 1%–1.5% EBITDA margin improvement by FY27–28, driven by Greenfield and Brownfield capacities reaching good utilization levels.
• Stainless-steel wire is a volatility pocket: Value sales declined due to a substantial fall in stainless-steel prices, though tonnage and production levels have improved; capacity is not being increased.
• Segment-level margin disclosure was declined: When asked for product-wise margin splits (EHV, Cables, Wires), management stated they do not calculate product-wise margins and instead offered EBITDA margin ranges by channel and sector.

Product & Channel Mix

• Binding wire was reclassified, not restated: The product moved from Institutional to Retail reporting, but total sales are unchanged; it was always sold through the dealer network.
• EPC contribution is shrinking by design: Pure EPC contribution has declined from 5% to under 4% this year; the EPC scale-up is mainly tied to EHV, where roughly 20% of supply goes to EPC.
• Cable and wire demand are independent: Management emphasized that no product is comparable to another; product-wise, segment-wise, and geography-wise there will be ups and downs, and investors should not read across.
• Volume growth is robust underneath pricing: Copper prices were stable (1%–2% YoY difference) while aluminium prices fell over 10%–12%; on a metal consumption and production basis, volume growth was ~26%.

Rajeev Gupta: "So overall, put together with the diversified, whether it is a product or it's a customer base, we will be growing in a 16% to 17% per annum basis. It is not the case like in the last quarter where the EHV sales was low, but still we have grown in this quarter. So again, our growth rate will be the same, will be very, very stable."

Guidance & Commitments

Key Metrics