Cholamandalam securities has given Buy recommendation for KEC International with a target price of Rs. 510 in its research report issued on May 05, 2022

Cholamandalam securities’ research report on KEC International

KEC International (KECI) reported muted numbers for 4QFY22, however notably the order inflow remains robust despite challenging conditions. Unprecedented cost inflation & adverse macroeconomic conditions dragged the margins to 7-year low at 5.9%. The revenue & PAT stood at ₹42.7bn/₹1.1bn (- 2.0%/-42.3% YoY) respectively. The margins are expected to remain below par for next two quarters citing mounting inflationary pressures. The order inflows and executions are likely to improve from 2HFY23. Going forward the larger & newer business opportunities on domestic front & easing cost pressures will aid in execution & generating order inflows. The management has guided for a 15% YoY revenue rise with ₹200bn in order inflows in FY23E. The non-T&D business verticals showed resilience to unfavourable business conditions with a robust growth of 21% YoY to ₹25.6bn, yet the de-growth in T&D business (-16% YoY at ₹19.4bn) dragged the overall performance for the quarter. The railways & civil businesses upheld their strong growth momentum (+11%/+34% YoY) in the wake of portfolio expansion to newer markets while robust performance in cables continued further (28% YoY). SAE towers seg. reported flat growth of 5% YoY.


The robust orderbook & inflating order intake offers revenue visibility over long term. Although the EBITDA margins are expected to remain muted in near term, it is expected to touch the double digits by FY24 on account of high margin orders due for execution in FY24. The diversification strategy, entry into newer markets, strong order book, steady new order inflow & well-demonstrated execution capabilities compel to remain positive on the company. We maintain our BUY rating on the stock with the revised price target of ₹510 (earlier target: ₹607).

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