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Research
KEC International - Order Inflows abate concerns - Way2Wealth
Posted On : 2012-08-03 20:42:34( TIMEZONE : IST )
On a consolidated basis KEC reported a revenue growth of 33% yoy with an operating margin of 7.7% & PAT margins of 2.5% @Rs.332mn. Revenue growth was ahead of expectation, but operating margin was impacted by a MTM loss of Rs.157mn and execution of lower margin orders. The management has guided for an improvement in margins over the course of the year to 8-9% for transmission orders. SAE Towers registered a strong performance as revenue grew by 45% with EBITDA margin of 18.6% 1QFY13.
Strong order inflow improves visibility
Consolidated order book stands @Rs.95bn yoy growth of 17%. KEC's order inflow was strong @Rs.20bn during Q1FY13 of which the Power Grid order constituted 27% of the total order inflow during Q1. It has also received a major order of Rs.3.6bn from the Tamil Nadu state transmission utility. 57% of the total order backlog comes from the international market whereas the rest 43% comes from the domestic market. Order book contribution from Transmission, Power Systems, Railways, Water, Cable and Telecom stood at 68%/18%/5%/4%/3%/2% respectively.
SAE Tower - the key contributor
SAE Towers registered a strong performance as revenue grew by 45% with EBITDA margin of 18.6% in 1QFY13. While revenue growth is expected to remain strong for SAE (25% yoy growth), steady EBITDA margin for SAE are expected to be at ~13-14%. Order backlog stands @Rs.6.74bn while it has secured order inflow worth Rs.1.8bn for supply of lattice towers, poles and hardware.
Phase II of Vadodara cables facility to be completed in 2-3 months
Phase I of the cable manufacturing facility at Vadodara (up to 33kV) has been commissioned and Phase II (up to 400kV) is expected to be fully operational in the next 2-3 months. The facility is expected to contribute ~Rs. 3.5bn to the company's revenue at peak capacity.
Valuations
Strong & diversified order book, robust execution and scaling up of new segments ensures growth for the current fiscal. At its CMP of Rs.56, we maintain our HOLD rating, as the stock trades at 7x FY13E EPS of Rs.9 per share.
