Anand Rathi
Target: ₹398
CMP: ₹307.65
Given its ₹25,000-crore, well-diversified (region-, segment-wise) order book, strong bid pipeline with ability to bag orders despite tough times, proven execution track record and healthy balance sheet, we are positive on KEC and maintain our Buy rating.
Its domestic T&D could see minor hiccups in ordering, likely to be balanced by strong traction overseas. It recently acquired a 50,000 tpa plant in Dubai. KEC has increased operations in over 100 countries. Exports contributed 44 per cent to revenue in FY20, up from 36 per cent in FY19.
We expect it to surprise in full-year execution due to its strong Q1 and ramp-up in inflow compared with peers. We roll forward our estimates to FY23 and forecast 12 per cent/17.3 per cent growth in revenue/PAT.
KEC recently bid for orders of ₹25,000-30,000 crore; in coming months, it will bid for orders of ₹30,000 crore, domestic and international. The international T&D pipeline (Mid-East, Far East, Africa, Bangladesh) is healthy. In its home market, opportunities in the Railways, civil and smart infra are strong.
We value KEC at 13x FY23e EPS, with a higher target of ₹398 (earlier ₹364). Slowdown in orders and pace of execution are key risks.