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KECI’s consolidated sales grew 28% YoY to Rs42.4bn, 11%/9% above our/consensus estimates. Growth was led by T&D (+46% YoY to Rs18.8bn) and Civil segment (+60% YoY to Rs9.6bn). EBITDA grew 45% YoY to Rs2.4bn, leading to EBITDA margin of 5.8%, up 70bps YoY/QoQ each and in-line with our/consensus estimate. PBT grew 26% YoY to Rs467mn while PAT was up 37% YoY to Rs423mn aided by lower tax rate at 9% (vs. 16% YoY). YTD-FY24 order inflow grew 30% YoY to Rs45bn while order book was flat QoQ at Rs301bn with domestic-international split of 71-29%. With strong renewable pipeline in domestic T&D and robust scale up prospects in railways & civil segments, KECI has retained its order inflow/revenue guidance of Rs250bn/Rs200bn for FY24. With SAE turning PBT positive in Q1 and all legacy projects likely to conclude in Q2, the operating margin guidance of 6%/8% for H1/H2 FY24 has also been retained. Factoring in business updates, we tweak our earnings estimates and retain ADD rating with a revised target of Rs660 (Rs610 earlier) based on unchanged P/E of 16x FY25E EPS.

Strong execution in T&D and Civil segment aided topline growth Segment-wise, T&D sales grew 46% YoY to Rs18.8bn while Civil segment grew 60% YoY to Rs9.6bn. Railways grew 8% YoY to Rs7.6bn. SAE Towers / Cables sales fell 16%/7% YoY to Rs3bn/Rs3.9bn. Domestic T&D opportunities is immense in renewable sector (wind and solar) from states like Rajasthan, Gujarat, AP and TN. For Civil business, growth will be largely driven by sectors such as data centers, water pipeline (Rs40bn order book), and residential/industrial/commercial construction. Railways offers large opportunities in signaling, speed upgradation, Kavach and international markets.

Operating margin in-line; H2 to see much improved margin profile EBITDA margin expanded 70bps YoY 5.8%, in line with management guidance of 6% margin for H1FY24. With SAE Towers achieving break-even in Q1 and pending legacy projects likely to conclude in Q2, KECI expects H2FY24 margin of 8%. The bid level margin in domestic T&D has started to trend up while international margin are close to double digit as steel prices have softened. Civil margin have also rose to high single digits.

Large tender pipeline comforting for healthy order inflow in FY24 YTD-FY24 order inflow stood at Rs45bn, up 30% YoY on low base. Key contributors to inflow was T&D (Rs14.9bn, up 48%), Civil (Rs13.5bn, up 8% YoY), Railways (Rs7.6bn, up 84% YoY), Cables (Rs5.4bn, up 20% YoY) and SAE Towers (Rs3.6bn, up 48% YoY). FY24 order inflow guidance of Rs250bn (+12% YoY) has been retained. Tender pipeline is large at Rs1trn. Domestic T&D (PGCIL + SEB + pvt) are likely to award tenders worth Rs200bn in next couple of quarters, where KECI’s win ratio is 15-16%. Saudi Arabia, UAE, Oman, Bangladesh and Nepal have good pipeline in overseas markets. Railways and civil also offers robust scale up prospects, including in international markets.

Maintain ADD with a revised target price of Rs660 We expect KECI to report revenue CAGR of 17% and EPS CAGR of 145% on a low base (FY21-25E CAGR of 18% on normalized base). Robust tender pipeline, strong execution capabilities and normalization of margin profile/NWC will support valuation.

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