Top Conviction Ideas : Buy KEC International Ltd for Target Rs. 1,030 - Axis Securities Ltd
* Healthy Order Backlog Ensuring Revenue Visibility: As of 30th June, 2025, the company’s order book stands at Rs 34,409 Cr. This, combined with an order inflow of Rs 5,517 Cr, provides strong revenue growth visibility for the next 18-24 months. Additionally, KEC holds the L1 position in projects valued at over Rs 40,000 Cr, primarily in the T&D business. With its established execution track record and the government's increasing focus on infrastructure development, the company is well-positioned for steady revenue growth, projecting a 15% CAGR from FY25 to FY27E.
* Encouraging Pipeline of Tenders Enhances Order Inflow Prospects: A substantial tender pipeline of Rs 1,80,000 Cr ensures a healthy order intake for the company in the foreseeable future. Out of the Rs 1,80,000 Cr bid pipeline, Rs 30,000 Cr is from domestic T&D, Rs 60,000 Cr is from international T&D, and the balance is from non T&D. For FY26, KEC has set a target of Rs 30,000 Cr in order inflow, out of which Rs 5,517 Cr has already been achieved, maintaining its growth momentum.
* Strengthening Margins Leading to Better Bottom-line Performance: Despite labour shortage and delay in receivables from the water segment, EBITDA margins have improved, primarily driven by the execution of international T&D projects and high-margin assignments. We expect margins to improve to 9% in FY27. Interest expense has lowered due to a debt reduction, which has further increased profitability. We pencil in EPS CAGR of 55% over FY25-27E.
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