Accumulate KEC International; target of Rs 911: Prabhudas Lilladher

Prabhudas Lilladher's research report on KEC International

KEC International (KEC) reported revenue growth of 11.3% YoY, while EBITDA margin expanded by 98bps YoY to 7.0%. T&D prospects remain strong with a ~Rs900bn order pipeline, driven by traction in the Middle East, Africa, and CIS, backed by key HVDC projects and upcoming STATCOM orders fueling power transmission growth. In the Civilbusiness, the payment collections in the Water has improved while the company has entered into the semiconductor EPC segment further expanding the opportunity basket. Furthermore, ~Rs50bn order book in the B&F along with higher ticket size orders in the Civil bolsters the segment’s prospects going forward. In Transportation, KEC is focused on fast-tracking completion of existing projects while Kavach execution remains slower due to supply chain disruptions. In renewable segment management targeted revenue of Rs30-40bn for next two years with focus on domestic opportunities. On the Cables front, growth is set to be driven by ongoing capacity expansion and the commissioning of a new aluminum conductor plant.

Outlook

Looking ahead, management is confident of achieving revenue growth of 15% with EBITDA margin of 8-8.5% supported by strong execution, increasing international and domestic footprints and repeat order from key customers. We maintain our ‘Accumulate’ rating with a TP of Rs911 (same as earlier) valuing the business at a PE of 18x Mar’27E (same as earlier).