Angel Broking neutral on KEC International

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Angel Broking neutral on KEC International

Angel Broking has maintained neutral rating on KEC International, in its February 1, 2012 research report.

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Angel Broking has maintained neutral rating on KEC International , in its February 1, 2012 research report.

"KEC International (KEC) posted a mixed set of numbers for 3QFY2012. The top line posted a robust growth; however, the continual stress on operating margins led to weak bottom-line (adjusted for the exceptional income). On the other hand, strong order intake for the quarter totaling Rs2,500cr (OB stands at Rs9,200cr as on 3QFY20212) and improvement in the balance sheet (easing of working capital) came as a positive surprise. The robust order book, coupled with solid execution skills provides a strong growth trajectory to the company. Given this we raise our revenues estimates by 4.5%/10.7% and lower our EBITDA margin estimate marginally for FY2012E/FY2013E."

"Consolidated revenue grew by 36.3% yoy to Rs1,460cr (Rs1,071cr), much higher than ours and street's estimates. On the EBITDAM front, KEC witnessed a steep contraction of 394bp yoy to 7.7%, marginally higher than our estimates, mainly due execution of low margin projects. Reported PAT was aided by an extraordinary income to the tune Rs53.0cr, thus masking a growth of 39.0% yoy to Rs80.6cr (Rs58cr). Adjusting for this gain, the PAT de-grew by 25.9% yoy to Rs43.0cr, 16.6% higher than our estimates."

"KEC has geographically diversified business model which insulates itself from slowdown in any particular region. Further, the company has also ventured in new businesses of railway and water, which have fared well and order inflows as well revenues have picking up at measurable pace. Amidst strong order wins the stock has witnessed a substantial rally, gaining ~50% in past few days. Further, at the CMP, the stock trades at reasonable PE multiple of 5.7x FY2013E EPS given the sector is plagued with heightened competition and company is facing margin pressures. Hence, we remain Neutral on the stock," says Angel Broking research report.  

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To read the full report click on the attachment