Neutral KEC International; target of Rs 900: Motilal Oswal

Motilal Oswal's research report on KEC International

KEC International Ltd (KECI)’s results were a mixed bag with in-line revenue being offset by a PAT miss. Revenue growth could have been higher; however, it was impacted by labor shortage and heavy monsoons in certain states. YTD order inflows jumped 50% YoY to INR134.8b, taking the order book to INR340.9b, up 9% YoY. For 1HFY25, the company reported revenue/EBITDA/PAT growth of 10%/14%/76% while for 2HFY25, we expect the same to grow at 13%/41%/84%. Net debt including acceptances declined YoY and QoQ on better collections. Overall, we continue to expect KECI to benefit from a strong T&D tendering pipeline for the coming few years. We marginally cut our estimates for FY25E/FY26E to bake in 2QFY25 performance. We maintain a NEUTRAL rating on the stock with a revised TP of INR900 (vs. INR950 earlier).

Outlook

KECI is currently trading at 24x/19x on FY26E/27E earnings. Our estimates bake in a revenue CAGR of ~14% and EBITDA margins of 8.3%/8.5% for FY26E/27E. We maintain our Neutral rating with a revised TP of INR900 (vs. INR950 earlier) based on 21x two-year forward earnings.