ICICI Direct recommended hold rating on KEC International with a target price of Rs 220 in its research report dated May 31, 2020.
ICICI Direct's research report on KEC International
KEC’s Q4FY20 revenues came in at Rs 3671 crore, down 4.4% YoY, marginally better than our estimate of Rs 3655 crore. During Q4FY20, overall T&D business revenue fell 11% YoY to Rs 2462 crore, supported by 39% growth in SAE division to Rs 444 crore. The railways business grew 36% YoY to Rs 861 crore while civil business segment revenue registered modest growth of 5% YoY to Rs 172 crore. Cables business fell 38% to Rs 217 crore YoY. EBITDA margins came in at 10.1%, marginally down 30 bps YoY. During Q4FY20, KEC’s order inflow was at Rs 1511 crore while the FY20 order book was at Rs 20503 crore.
Outlook
Overall performance has been satisfactory across segments for FY20 barring order inflows, which were impacted by economic slowdown. Efficient working capital management and execution ramp-up despite challenges should comfortably ensure 5.1% revenue CAGR in FY20-22E. We value KEC at 10x FY22E EPS with a revised target price of Rs 220 and revise our rating from BUY to HOLD. Key risk: execution delay, stress on working capital.
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