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Reliance Securities
KEC International (Buy)
CMP: ₹178.55
Target: ₹328
KEC international (KECI) has corrected about 50 per cent in the last two months owing to Covid-led disruptions, which we believe offers a fresh buying opportunity, as the company has already received approvals from the respective authorities to start operations at a few of its sites albeit in a phased manner.
KECI has also sought permission of the relevant authorities for resuming operations at its remaining factories. Its facilities in Brazil and Mexico, which have been identified as essential sector in the respective geographies, have been operational throughout this period.
Outlook & valuation: The management has guided that the revenue is expected to decline marginally (₹300 crore) in 4QFY20. Historically, the last quarter of the fiscal contributes meaningfully in so far as collections and orders inflow are concerned.
We downwardly revise our revenue and earnings estimates by 3 per cent/18 per cent/19 per cent and 5 per cent/31 per cent/27 per cent for FY20E/FY21E/FY22E to factor the near-term impact of Covid-led disruptions and a phased pick-up in execution by 2HFY21E.
Rolling over our estimate to FY23E, we maintain our ‘buy’ recommendation on the stock with a two-year target price of ₹328 (from ₹450 earlier), valuing at 12x FY23E earnings (from 15xFY22E earlier).
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