Prabhudas Lilladher is bullish on KEC International has recommended buy rating on the stock with a target price of Rs 352 in its research report dated August 07, 2019.
Prabhudas Lilladher's research report on KEC International
KEC International (KEC) reported PAT of Rs0.9 bn (up 4% YoY) which was lower than our estimate (PLe Rs1 bn) despite 4% higher revenues than our estimates. This was due to higher interest and depreciation cost (due to lease accounting policy change on account of IND AS116) and lower other income. Order Inflows were down 59% YoY at Rs111.5 bn, due to postponement of awarding on account of general elections. KEC is L1 in order worth Rs3.5 bn and Order backlog stands at Rs190 bn (up 5% YoY) which gives strong revenue visibility. The management is confident on execution momentum and maintained it guidance for revenue growth of 15-20%, EBITDA margin of 10.5% (flat) and 20% growth in order inflow for FY20. H2FY20 looks strong due to robust pipeline of orders from domestic and international markets. In the domestic market, order inflow is expected to be driven by Green Energy Corridor, States, Railways, Civil etc. In International markets, tender pipeline looks strong from Africa, Singapore, Thailand, Malaysia and Saudi. We believe that a strong order book, steady margin profile and healthy outlook in T&D segment and emerging segments like Railways/Civil will help KEC deliver 19% earnings CAGR over FY19‐21E.
The stock is currently trading at 12.6x/10.9x FY20/FY21E. We maintain “BUY” with TP of Rs352 (13x FY21E).
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