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CD Equisearch
KEC International (Buy)
CMP: ₹321.5
Target: ₹409
KEC International is a global infrastructure EPC major. It has presence in the verticals of power T&D, cables, railways, civil, smart infrastructure & solar.
The stock currently trades at 14.0x FY20e EPS of ₹22.56 and 11.6x FY21e EPS of ₹27.25. Significant growth opportunities in the power transmission sector — extensive network of transmission lines are being developed over the years for evacuating power produced by different electricity generating stations and distributing the same to the consumers — bodes well for KEC. Although order inflow remained subdued — down by 6.7 per cent y-o-y in FY19 — mainly due to weakness in T&D segment, but international traction in West Asia, Africa and Brazil would help resurrect growth over the coming years.
It also stands to benefit from increased spending on railway infrastructure by the Centre. Yet, timely compliance with the ongoing frequently changing regulatory requirements in different countries can be challenging. Volatility in foreign currency fluctuations — as witnessed in FY15 — cannot be overlooked either.
On balance, we advice buying the stock with target price of ₹409 based on 15x FY21e EPS of ₹27.25 over a period of 9-12 months.
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