With a healthy tender pipeline of Rs 1.1 lakh crore, expected revenue growth, profitability and better working capital management, brokerage firm Prabhudas Lilladher maintained ‘accumulative’ coverage on with a target price of Rs 473 with a one-year horizon.
KEC International’s tender pipeline remains healthy at 1.1 lakh crore (domestic around 50 per cent), of which orders worth nearly Rs 30,000 crore have already been tendered out. Margins are expected to improve from H2FY23 and are likely to reach double digits by FY24, said Prabhudas Lilladher.
“We expect working capital to improve owing to focus on cash collection, SAE legacy order getting completed, receivables coming from Afghanistan and railways payment getting normalized. Given a healthy order book and tender pipeline, management maintained its revenue growth guidance of around 15 per cent and order inflow of about Rs 1,900-2,000 crore for FY23E,” the brokerage said.
“We remain positive on KEC in the long run given its strong OB, healthy execution momentum, strong domestic & international T&D outlook and strong growth visibility from non-T&D segments like Civil, Railways, Oil & Gas etc,” the brokerage said.
“Given the healthy tender pipeline and reviving margin profile, we expect KEC to report revenue CAGR of 15 per cent and PAT CAGR of 59 per cent from FY22 to FY24E. The stock is trading at a PE of 20.3x/11.9x FY23/24E. We maintain an accumulate rating on the stock with a target price of Rs 473, valuing it at PE of 13x FY24E,” Prabhudas Lilladher said.
The brokerage further added that the cable business is likely to be one of the key growth drivers going forward. KEC has introduced 15 new products in the last two years, majorly for railways. Its focus is on improving the margins profile for the segment. The company has reinforced its presence in cabling solutions and is currently executing one large cable order in Kerala.
The oil & Gas pipeline order book stands at around Rs 1,000 crore (including L1). The company has bagged three projects from in the segment.
Significant pipeline projects planned for North-East India and the government’s target to increase gas in the energy mix from 6 per cent currently to 15 per cent by 2030 provide a healthy opportunity for the segment, it added.
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