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.

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

The company said it’s 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 within the last 1 year as compared to the BSE Small-cap index which has gained over 111 percent.

In an interview to CNBC-TV18, Vimal Kejriwal, MD and CEO of the corporate , 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.

Later he explained that, it is also said that its based on  year-on-year purpose, and in order to intake it has grown fourfold. “As far as order intake cares , for this quarter we’ve roughly around Rs 2,900 crore of orders announced till date. If you compare this with the corresponding quarter last year, it had been only Rs 700 crore. in order that way, it’s grown by almost 4 times.”

Kejriwal added that the Transmission and Distribution  sector is slowly learning, and that they are seeing a rise so as intake within the vertical. “Almost 45 percent in Wednesday’s announcements are from the T&D sector. We are seeing the T&D sector learning . Even last year, our order intake was 1.8 times in T&D. So, core T&D is doing well.”

The company is additionally bullish on the civil vertical and expects to double the revenue in civil this year.

HDFC securities has also expected the margins to inch towards double-digit once the corporate sees a growth of fifty percent in FY23.

Motilal Oswal’s Order inflow environment improving, with a robust pipeline: The momentum in order wins continued into Q1 FY22, with KEC winning ~Rs 3,000 crore worth orders in FY22 YTD. Tenders under evaluation and within the pipeline stood over Rs 65,000 crore, thus indicating healthy potential order wins ahead.

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

Over the years, the corporate 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 still drive revenue growth in coming years.

The stock trades are at 15x/12x FY22e/23e subsequently. And we slightly tweak our estimates considering management commentary with expecting good execution in future. Also it is  expected that 11%/24% revenue/PAT CAGRs over FY21-23. We are  maintain our buy rating, with a revised target price of Rs 462 (earlier Rs 454).

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