KEC International Ltd is a mid-cap company with a market capitalization of Rs 13,123.08 crores. Power Transmission & Distribution, Railways, Civil, Urban Infrastructure, Solar, Smart Infrastructure, Oil & Gas Pipelines, and Cables are among the company’s project portfolios. KEC International Ltd was trading at a market price of Rs. 524.95 at 3:30 p.m. IST on 13 January, gaining Rs. +30.25 or 6.11 percent. On October 26, 2021, the stock reached a 52-week high of Rs 550 and a 52-week low of Rs 337.65 on 18th January 2021, respectively. According to the NSE, it is now trading 4.55 percent below its 52-week high and 55.47 percent above its 52-week low. Emkay Global Financial Services Ltd, on the other hand, has issued a buy call on the stock, with a target price of Rs 530, and expects the stock to reach its target price within the next 12 months.
Investment rationale for KEC International Ltd according to the brokerage
- Year-to-date order inflow for KEC stands at Rs130bn, with L1 orders of Rs60bn. This is the highest-ever inflow till 9M. Based on this, we have raised our order inflow estimate to Rs180bn for FY22.
- Till H1FY22, Civil (Rs24.5bn inflow – 33% of overall), T&D (Rs20.7bn inflow – 28% of overall) and Railways (Rs12.6bn inflow – 17% of overall) were the major contributors. There has also been an improvement in inflows at SAE Towers.
- KEC had reported 12% YoY growth in revenue in H1FY22 on the back of ~140%/70%/18% YoY growth in Civil/Cables/Railways. SAE revenue was down by 35% due to lower opening order book.
- We believe that with the second phase of the Green Energy corridor getting Cabinet approval, orders from Railways and Civil will drive the inflows for FY23 and hence the momentum should continue.
- The acquisition of Spur Infrastructure will give KEC entry into the Oil & Gas space. In the past few years, KEC has successfully diversified into Railways and Civil.
Buy With A Target Price of Rs. 530
Emkay Global has said in its research report that “We cut our FY22E EPS by 7% to factor in delays in execution in Q3 (due to construction ban in Delhi and floods in Chennai) and delay in margin recovery in SAE. Given SAE is expected to turn positive in FY23, we estimate FY23/FY24 margins at 8.7%/10%. Average margins during FY17 to FY20 stood at 10.1% and, hence, we believe this is achievable. Our FY23E/FY24E EPS stands at Rs28.8/37.7. Maintain Buy with a target price of Rs530.”
The above stock has been picked from the brokerage report of Emkay Global Financial Services Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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