Comments
Motilal Oswal
KEC International (Buy)
Target: ₹450
CMP: ₹388.40
KEC International’s Q4-FY21 revenue was in line with our estimate, with the miss on operating margin largely attributable to commodity-led cost escalation and weaker execution in the SAE business. It continued its impressive performance in the Ex-T&D segment, with revenue growing 68 per cent Y-o-Y, led by strong growth in the Railways and Civil segments.
Interest cost reduction continued in Q4, while the decline for FY21 stood at 15 per cent Y-o-Y. This was largely on account of a favorable mix between domestic and overseas debt levels and is primarily a function of a decline in interest rates.
KEC International is steadily diversifying the business to avoid concentration risk from the Power T&D business, with the Railways and Civil segments emerging as strong growth avenues.
The company has all the ingredients in place for growth over the next 3–5 years. A strong promoter parentage and focus on the Balance Sheet should help KEC International emerge stronger post the Covid-19 crisis v/s peers.
Key risks include continuously rising commodity prices and delay in new awarding.
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