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Research
KEC International - 1QFY2013 Result Update - Angel Broking
Posted On : 2012-08-03 20:44:13( TIMEZONE : IST )
KEC International's, reported results, met expectations on the bottom line, with PAT coming in at Rs.33.2cr (flat on yoy basis) against our expectation of Rs.32.1cr. Though the sales exceeded our expectation by 11.6%, lower than expected operating margins and higher tax counterbalanced it. Sales growth was strong at 33.4%, coming in at Rs.1,364cr (Rs.1,023cr). Strong sales numbers were primarily due to KEC's international transmission (55.3% sales growth) and SAE- Transmission (44.9%) business segments. EBITDA grew by 7.5% yoy to Rs.103cr for the quarter with EBITDA margin at 7.6% down from 9.4% yoy. EBITDA margin was also impacted due to MTM loss of Rs.16cr. Order inflow was robust in excess of ~Rs.2,200cr, taking the total backlog to Rs.9,462cr (sales coverage of 1.5x). The management indicated that overall margins are expected to remain under pressure going forward; however domestic margins should improve going forward. We maintain Buy rating on the stock.
Robust order book: Order intake during the quarter totaled ~Rs.2,200cr, better than its average run rate over the past few quarters. The orders were diversified across all of its operating segments as well as geographies. The strong order accretion led to a robust order backlog of 9,462cr (1.5x trailing 4 quarter revenues) split across transmission (68%), power systems (18%), railways (5%), water (4.2%) and telecom (2.1%). Geographically, order backlog is split across India (43%), MENA (9%), Americas, (14%) and Central Asia and Africa (27%).
Outlook and valuation: We raise our revenue growth estimates by 2.6%/3.2% for FY2013E and FY2014E, respectively, factoring in strong execution and strong order intake, however reduce our EBITDA margin expectations. This has lead to downward earnings revision of 15.9% and 6.7% for FY2013E and FY2014E respectively. At current levels the stock is trading at 5.0x on our FY2014E EPS. We maintain Buy on the stock and reduce our Target Price to Rs.69.
