Buy KEC International Ltd For Target Rs. 1030 By Axis Securities Ltd
Change in Estimates Post Updates
FY26E/FY27E: Revenue: 0%/0%; EBITDA: 0%/0%; PAT: 0%//0%
Recommendation Rationale
Robust order book & L1 position: The company holds a robust order book and L1 position of over Rs 40,000 Cr (1.8x FY25 Revenue), with a T&D and Non-T&D mix of 61:39. Additionally, a strong bid pipeline of Rs 1,80,000 Cr is under evaluation. As of now, order intake for FY26 stands at Rs 2,000 Cr, with management expecting total inflows of Rs 30,000 Cr during the year. This order book provides clear revenue visibility for the next 6-8 quarters. The company has guided for 15% revenue growth in FY26. Backed by a consistent execution track record and increased government focus on infrastructure, the company is poised for steady growth, projecting a 15% CAGR over FY25-27E.
Large opportunity in Domestic & International T&D: The company continues to sharply focus on both domestic and international T&D orders as it foresees notable opportunities. With the heightened government thrust on renewables and the increase in power demand, business growth is assured. The company has a tender pipeline of over Rs 90,000 Cr in T&D, both domestic and international, and a current order book and L1 of Rs 24,500 Cr, which is expected to drive sustainable growth. The company has secured 90% of T&D orders from PGCIL. SAE business continues to deliver profitable growth.
Sequential improvement in EBITDA margin: EBITDA margins are improving, driven by the execution of international T&D projects and high-margin assignments. Management has guided for EBITDA margins in the range of 8-8.5% in FY26. We expect margins to improve to 9% in FY27.
Reduction in Finance Charge: The company expects debt, including working capital and acceptances, to reduce and the finance charge as a percentage of revenue is expected to be 2.5%.
Sector Outlook: Positive
Company Outlook & Guidance : The management has guided for 15% revenue growth with EBITDA margins in the 8-8.5% range in FY26. The order inflow target for FY26 is Rs 30,000 Cr.
Current Valuation: 20x FY27E EPS ( Earlier Valuation: 20x FY27E EPS)
Current TP: Rs 1030/share ( Earlier T P: Rs 1030/share)
Outlook: The company has a well-diversified and robust order book and an L1 position, providing healthy revenue visibility for the next 6-8 quarters. Moreover, the favourable government emphasis on T&D, upcoming international T&D opportunities, better traction in building and factory verticals, and strategic focus on growing the cable business bode well for the future growth of the company.
Valuation & Recommendation: The stock is currently trading at 24x/17x FY26E/27E EPS. We maintain our BUY rating on the stock and value it at 20x FY27E EPS with a TP of Rs 1,030/share, implying an upside of 18% from the CMP.
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SEBI Registration number is INZ000161633
