Brokerages initiate buy on KEC International, expect up to 17% upside

HDFC Securities has a buy rating with target at Rs 452 while Motilal Oswal expects the stock to test Rs 475.

June 17, 2021 / 02:33 PM IST


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KEC International share price added a percent intraday on June 17 two day after it won an order worth more than Rs 900 crore.

The company said it has secured orders worth Rs 937 crore across transmission and distribution, railways, overhead electrification, and semi-high speed rail verticals.

The stock has risen 77 percent in the last 1 year in comparison to the BSE Smallcap index which has gained over 111 percent.

In an interview to CNBC-TV18, Vimal Kejriwal, MD and CEO of the company, said that the order book currently is at about Rs 25,000 crore, including L1. “Rs 20,000 crore would be order book and Rs 5,000 crore would be L1,” he said.

He also said that year-on-year, order intake has grown fourfold. “As far as order intake is concerned, for this quarter we have roughly around Rs 2,900 crore of orders announced till date. If you compare this with the corresponding quarter last year, it was only Rs 700 crore. So that way, it has grown by almost 4 times,” he explained.


Kejriwal said that the Transmission and Distribution (T&D) sector is slowly picking up, and they are seeing an increase in order intake in the vertical. “Almost 45 percent of Wednesday’s announcements are from the T&D sector. We are seeing the T&D sector picking up. Even last year, our order intake was 1.8 times in T&D. So, core T&D is doing well,” he said.

The company is also bullish on the civil vertical and expects to double the revenue in civil this year. He also expects the margins to inch towards double-digit once the company sees a growth of 50 percent in FY23.

HDFC Securities | Rating: Buy | Target: Rs 452

Research and broking firm HDFC Securities in its report noted that with strong pre-qualification in domestic and international markets across sectors, KEC International is well-placed for a re-rating. "We have a buy rating on the stock with a target price of Rs 452 per share (14x Mar-23 EPS).

The company is targeting order inflow of Rs 16000-18000 crore in FY22, a 35-52 percent jump over Rs 11900 crore orders in FY21. Of its target, the company has already received Rs 3000 crore in FY22. Its current bid pipeline stands at Rs 65000 crore. While domestic T&D ordering is expected to remain subdued, we believe increased traction in MENA and a few SAARC nations would help fetch Rs 8000-9000 crore T&D orders.

Government’s focus on infrastructure, revival in private Capex, company venturing into new oil and gas pipeline business, and capabilities across sectors would drive growth in non-T&D. KECI is targeting another Rs 8000-9000 crore order wins from it.

Motilal Oswal | Rating: Buy | Target: Rs 475

Order inflow environment improving, with a robust pipeline: The momentum in order wins continued into Q1 FY22, with KEC winning ~Rs 3000 crore worth orders in FY22 YTD (v/s Rs 700 crore YoY). Tenders under evaluation and in the pipeline stood over Rs 65000 crore, thus indicating healthy potential order wins ahead.

Business diversification strategy playing out well: KECI has been steadily investing across the non-T&D segment of the business. As a result, it has the requisite expertise in key segments like Railways and Civil. The non-T&D segment constitutes 42% of the order book at present v/s 13% in FY16.

Margin to scale up as business mix improves: With a higher focus on engineering projects, it will participate in some higher margin tenders. Margin profile will also improve as the share of Civil business further scales up. The management aims at double-digit margin in the near term.

Valuation and view: At the CMP, the stock is trading at 16x/13x FY22E/FY23E EPS. We maintain our buy rating with a target of Rs 475 per share (15x FY23E EPS, marginally below its long-term one-year forward multiple of 15.8x).

Anand Rathi | Rating: Buy | Target: Rs 462

Over the years, the company has diversified its business from T&D to other non-T&D segments. In FY21, the non-T&D business contributed 43% to revenue, up from 17% in FY16. The non-T&D business has grown 30% over FY16-21 and would continue to drive revenue growth in coming years.

Outlook: The stock trades at 15x/12x FY22e/23e. We slightly tweak our estimates considering management commentary and expecting good execution in future. We expect 11%/24% revenue/PAT CAGRs over FY21-23. We maintain our buy rating, with a revised target price of Rs 462 (earlier Rs 454).

Risks: Slowdowns in orders and in pace of execution.

Disclaimer: The views and investment tips expressed by investment experts on are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.
Sandip Das
first published: Jun 17, 2021 02:33 pm

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