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Technical Outlook

• Nifty Infra index hit a new high after previous year’s multi year breakout indicating structural uptrend. In the power infra space, one of our top recommendations is KEC, which is resolving out of a triangular consolidation pattern of past two years indicating resumption of uptrend

• Structurally, share price has formed a strong base around 350-370 zone, which was earlier breakout level and rising 52-week average

• We expect the stock price to extend its up trend towards | 598, which is 123.6% external retracement of CY22 decline that coincides with triangle breakout implication

Fundamental Outlook

• KEC International (KEC) is one of the EPC majors in key infrastructure sectors such as power T&D, railways, civil, urban infrastructure, solar, smart infrastructure, oil & gas pipelines and cables. A strategic shift in portfolio from T&D to non-T&D (13% contribution in FY16 increased to 50% in FY22). T&D diversified across countries with entry in ~20 countries in last five years

• KEC’s SAE business’ legacy EPC projects will get executed by Q3FY23, which will arrest losses and help to improve margin. Also, execution of new orders with good margins will come into play in H2FY23

• KEC over the past years has significantly de-risked its business from a core T&D player to an all-round infra player with sizeable scalability happening in the railways and the civil segment. Non T&D business is now almost 50% of the overall revenue pie. With strong backlog of | 27569 crore with L1 orders worth ~| 6500 crore and execution low margins orders behind us, we believe KEC is entering a strong growth trajectory. With PAT CAGR of 53.2% over FY22- 24E and reducing interest cost intensity, we expect rerating to happen for the stock. We value KEC at | 515 i.e. 17x P/E on FY24E EPS

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