Cholamandalam Securities is bullish on KEC International has recommended buy rating on the stock with a target price of Rs 351 in its research report dated May 09, 2019.
Cholamandalam Securities' research report on KEC International
In 4QFY19, KEC posted a muted consolidated revenue growth of 4.9% YoY to INR 38.4bn owing to delays in environmental approvals for the SAE Brazil EPC projects and execution headwinds in some domestic private projects. Non T&D business continued its growth trajectory with Railways segment (constituting 16.5% of Consol. Revenue) continuing to witness strong growth and doubling its revenue for the third consecutive year. Civil continued to gain traction by expanding their client base to 17 from 10 in FY18 and adding new sub-segments. Non T&D revenue grew 23% YoY to INR 8.3bn of which revenues from railway segment jumped 76% YoY to INR 6.3bn, revenue from civil & water segment grew by 29% YoY to INR 1.6bn and that from Solar fell 83% YoY to INR 0.3bn. The cables segment registered a revenue growth of 26% YoY to INR 3.5bn driven by higher export and HT/EHV cables revenues.
Outlook
Strong outlook for Railways & Civil segment coupled with healthy T&D order pipeline are expected to aid company post healthy revenues going forward. At the current market price KEC is trading at a P/E of 10.6X its FY21E. We assign a P/E of 13X to its FY21 EPS to arrive at a target price of INR 351 and rate the stock a BUY.
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