Buy KEC International: target of Rs 487: Sharekhan

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Sharekhan's research report on KEC International

For Q4FY2022, KEC International Limited (KEC) reported poor set of numbers across all fronts. The quarter was impacted by legacy orders in Brazil, suspension of work in Afghanistan and a steep increase in commodity prices. The management expects FY2023 to be better in terms of execution and margins as it renegotiates certain fixed price contracts in T&D segment, commodity prices cool off and impact of SAE Brazil’s legacy order subsides. Further, higher contribution from non T&D orders in revenues would help OPM to normalise from H2FY2023. Year-to-date (YTD) order inflows grew by 45% y-o-y to Rs. 17,203 crore and strong order book of Rs 27,716 crore including L1.

Outlook

We have trimmed our estimates but retain a Buy on KEC with a revised PT of Rs. 487 given strong likelihood of margins bottoming out, strong order backlog, healthy order pipeline and diversified business model.

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