Accumulate KEC International Ltd For Target Rs. 911 - Prabhudas Liladhar Capital Ltd
Decent Q4 amid strong domestic momentum
Quick Pointers:
* Tender pipeline stands at ~Rs1.8trn, with T&D being the primary driver.
* Management guided a ~15% YoY revenue growth with EBITDA margin ranging 8-8.5% in FY26. Meanwhile, Order intake is expected to be ~Rs300bn.
We revise our FY26/27 EPS estimates by -4.0%/-1.8%, factoring in continued weakness in Civil, Railways and O&G despite strong growth in T&D. KEC International (KEC) reported revenue growth of 11.5% YoY, while EBITDA margin expanded by 155bps YoY to 7.8%. Domestic T&D continues to remain robust while traction in the Middle East, CIS and Americas will drive international T&D business. The Cables business value unlocking will be further aided by capacity expansions across E-Beam and Elastomeric cables. In the O&G business, management plans to pursue only international opportunities amid smaller domestic project sizes and delays. Additionally, labor shortages and payment collection delays in water projects continue to impact Civil business. Management remains selective on railway order booking, focusing on better working capital management. Reflecting confidence in the domestic market outlook, management has guided for ~15% YoY revenue growth with margin of 8-8.5% along with order intake of ~Rs300bn and NWC days of <100 days in FY26. We roll forward to Mar’27E and maintain ‘Accumulate’ rating with a revised TP of Rs911 (Rs801 earlier) valuing the stock at a PE of 18x Mar’27E (18x Sep’26E earlier).
Long term view: We remain positive on KEC for the long term given its 1) strong order book, 2) healthy execution momentum, 3) robust T&D outlook, especially in renewable energy, and 4) expansion of Cables business. The stock is currently trading at a P/E of 23.2x/17.0x on FY26/27E earnings.
Strong execution in standalone T&D, Cables and Renewables drive top line: Consolidated revenue rose 11.5% YoY to Rs68.7bn (PLe: Rs69.4bn) driven by strong execution in standalone T&D (+36.2% YoY to Rs39.8bn), Cables (+28.9% YoY to Rs5.9bn) and Solar/Renewables (+121.5% YoY to Rs3.6bn) while Railways (- 26.1% YoY to Rs6.8bn), Civil (-7.2% YoY to Rs11.7bn), O&G (-67.0% YoY to Rs700mn) and SAE towers (-24.2% YoY to Rs3.5bn) dragged. EBITDA increased by 38.9% YoY to Rs5.4bn (PLe: Rs5.7bn) while EBITDA margin improved by 155bps YoY to 7.8% (PLe: 8.2%) driven by better gross margin (+208bps YoY to 21.5%) partially offset by higher other expenses (+49bps YoY % of sales). Adj. PAT came in at Rs2.7bn (vs Rs1.5bn in Q4FY24) (PLe: Rs2.8bn) driven by better operating performance and higher other income (Rs202mn vs Rs78mn in Q4FY24).
Robust order book stands at Rs334.0bn (1.5x TTM Revenue): Q4FY25 order inflows declined 50.5% YoY to Rs26.9bn. However, FY25 order intake grew by 35.0% YoY to Rs246.9bn. Q4FY25 standalone T&D inflow declined by 34.9% YoY to Rs19.1bn, Railways intake declined by 88.2% YoY to Rs220mn, Civil order intake lowered by 83.1% YoY to Rs2.7bn and SAE towers order intake lowered by 95.0% YoY to Rs220mn against high bases. Meanwhile, Order book stands at Rs334.0bn, plus L1 position of over ~Rs66bn. Tenders under evaluation and in pipeline stand at ~Rs1.8trn with 50% coming from T&D segment.
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