Originally posted by Vivek Sukhani Like you have done for Graphite and Allahabad, will you be able to share your thinking process for KEI and parsvanath developers?

Hi,

I am putting down my analysis on Kei Industries below. The source of data is livemint.com.

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KEI Industries Limited is a manufacturer of wire and cable products sold in residential, commercial and industrial markets. The Company specializes in the development and manufacturing of a range of wires and cables, stainless steel wires manufacturers in India, low-tension and high-tension power cables, medium voltage and high voltage power cables, copper/aluminum power cables, and polyvinyl chloride and cross linked polyethylene cables. It also includes copper control cables, instrumentation cables, screened cables, thermocouple extension cables, flexible wires and cables, rubber cables, mining cables, fire survival cables, winding wires, underground cables, spring and welding wires, knitting and rope wire, weaving fencing and mesh wire, wire for braiding and hoses, binding/tying wire, chain and conveyer belt wire, wire for ba*ls and fasteners, wire for staple pins and kitchen wares. KEI three manufacturing units are located in New Delhi , Bhiwadi (Alwar) and a Silvassa.

KEI Industries is the largest listed cable manufacturer and is a play on the two hot investment themes of power and infrastructure. It is currently operating in a business where there is strong product demand, low supply risk, negligible threat from China and predictable profitability.

KEI Industries Ltd has started Commercial Production at its New Unit at Chopanki near Bhiwadi, Distt. Alwar (Rajasthan) for manufacturing of HT and LT Power Cables. This New Unit has been registered as 100% Export Oriented Undertaking (EOU). It has production capacity of 10,000 Kms and will generate revenue of approximately Rs 300 crores annually (Annual Sales for year 2007 was 600 Crores), at its full productivity.

Major Competitors:-

Company          Sales     Current     Change     P/E     Market     52-Week
          (Rs.Cr.)Price     (%)     Ratio     Cap.     High/Low
                              (Rs.Cr.)     
KEI Industries     601.04     83     1.53     12.57     504.71     168/64
Nicco Corpor     390.17     27.35     -4.2     40.81     248.06     50/17
Universal Cables380.96     87.2     1.87     9.18     201.7     140/72
Torrent Cables     199.69     298     5.28     11.42     222.9     440/138
RPG Cables      182.9     42.3     5.09     76.77     135.47     70/36

As can be seen above, Kei Industries is clearly the leader in Power cables manufactures in India. It has started a new plant in Rajasthan, that would increase its revenues substantially in coming times.

Now going to financials, over the years (from 2003 to 2007) it has increased its profitability a lot.

               Mar ' 07      Mar ' 06      Mar ' 05      Mar ' 04      Mar ' 03
Income :           
Operating Income      601.04      299.40      204.98      96.65           77.08
            
Expenses           
Material Consumed      456.73      213.46      157.01      69.31           54.56
Manufacturing Expenses 22.07           15.55           10.16           4.64           4.27
Personnel Expenses      11.39           8.06           5.13           4.37           3.89
Selling Expenses      13.39           10.40           6.10           5.60           3.31
Adminstrative Expenses 10.11           6.99           4.83           3.50           3.06
            
Cost Of Sales           513.69      254.46      183.24      87.42           69.09
            
Operating Profit      87.34           44.94           21.74           9.23           7.99
            
Other Recurring Income 0.73           0.80           0.11           0.01           0.00
            
Adjusted PBDIT      88.07           45.74           21.85           9.24           8.00
            
Financial Expenses      24.44           10.17           6.85           5.61           4.92
Depreciation           5.65           2.69           1.99           1.76           1.72
Other Write offs      0.00           0.00           0.28           0.28           0.28
            
Adjusted PBT           57.97           32.87           12.74           1.59           1.08
            
Tax Charges           17.82           7.49           4.00           0.67           0.26
            
Adjusted PAT           40.15           25.38           8.74           0.93           0.82


Key points:-

1. OPM of 15%.
2. RONW from 4% to 26%.
3. Debt/Equity is a bit high at 2, because of the funding it needed for its new plant.
4. Return of long term funds 22%.
5. Quoting at an attractive PE of 10 (Trailing 4 quarter EPS of 8.19).
6. Quoting at a Market Cap/Sales ratio of less than 1.

Comparing it with one of its nearest competitors Universal cables.

               Kei          Universal Cables
PROFITABILITY RATIOS     2007          2007
          
Operating Margin (%)     14.53           12.64
Gross Profit Margin (%)     13.59           10.48
Net Profit Margin (%)      6.67           5.73
Adjusted Return On Net
Worth (%)           26.44           13.96
Reported Return On Net
Worth (%)          26.45           13.97
Return On long Term
Funds (%)           22.37           19.76

Overall, Kei Industires present a good combination of growth and value, and I feel the market has not valued the company appropriately. May be, it gets rerated once the company's new plant starts contributing to the topline. But overall, the downside looks limited with a substantial upside. The risk/reward ratio seems quite favourable for an investor at this price (CMP 81, as I write this post).

Senior members, please give ur views and comments on my analysis.

Thanks,
Abhishek.

Originally posted by sunny agarwal hi abhishek..i would like to bring under light a company called ramsarup industries limited. the comopany i believe is better positioned and is more attractively availaible than kei industries. ramsarup industries is a one stop shop for all infrastructure needs. right from iron ore mining to steel production to making steel wires and laying down down transmission lines. it is has planned expansion of more than 4000 crores in the next 2 years. companys market cap is arnd 300 crores and pe less than 6. Will throw more light on ramsarup once i receive ur response. A good business to be invested in.

The company looks ok to me but the company has very low operating and net profit margins of the company.

And one can't compare it with Kei as both are manufacturing different products. I dont have much idea about the products it make and the prospects of the business. So, I cant make further comments on it.

Abhishek.

HEY JAIN SAAB AND AGARWAL SAAB  EVEN I AM BULLISH ON K.E.I   AM HOLDING AROUND 25  ... I THINK PRICE AROUND 10 RS. IS QUIET ATTRACTIVE FOR LONG TERM  . 

I ALSO HOLD PARAMOUNT COMMUNICATION  WHICH IS ALSO FROM THE FIELD OF WORK  MANUFACTURE OF POWER CABLES WHICH IS  I HOLD THAT AROUND 30 ...

YES SITTING IN LOSS IN BOTH BCOZ OF MARKET CONDITIONS ..

 

DO YOU PPL HAVE ANY VIEWS TO SHARE ON BOTH KEI AND PARAMOUNT COMMUNICATIONS BOTH ARE DELHI BASED ....