Moneycontrol Bureau
Religare Institutional Research has maintained buy rating on KEC International with target price of Rs 150, citing likely improvement in cash flows & margins in FY17 and pick up in orders from State Electricity Boards (SEBs). The stock rallied 5 percent intraday Wednesday.
After meeting with the company's management, the brokerage says it remains sanguine on power transmission company's growth prospects as margins and cash flows improve with an increase in order size and a pick-up in execution.
On the broader market, the management expects flat orders of Rs 22,000-25,000 crore annually from the Power Grid Corporation of India over FY17-FY18. However, an increase in activity from State Electricity Boards (SEBs) should lead to order inflow growth for the company.
Further, management expects international orders to flow in, especially from Far East geographies, where the company has participated in tenders worth Rs 1,800-2,000 crore.
As per management, with an increase in project sizes, competition has reduced and remains constricted to 4-5 players. Further, projects which are complex or funded by international financial agencies are now being clubbed together with equipment supply projects, which increases their scope and reduces competition.
The brokerage says private sector transmission projects – or tariff-based competitive bidding (TBCB) projects – are facing delays in financial closure due to constraints in bank funding. However, management believes that if some of these were to attain financial closure, EPC orders from them would strengthen order inflow prospects.
At 14:22 hours IST, the scrip of KEC International was quoting at Rs 144.50, up Rs 5.35, or 3.84 percent on Bombay Stock Exchange.Posted by Sunil Shankar Matkar
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
