KEC International - Management Meet Note - Nirmal Bang

We met the management of KEC International (KEC) during the RPG Annual Investor Conference 2013. The management re-iterated its stance of completing the execution of pending backlog of loss making projects in the new business segments by 2QFY14E. They expect to register 7% to 9% operating margin across all business segments from 2HFY14E onwards. Post tightening of bidding norms by PGCIL, except the key 4 players - KEC, Kalpataru, L&T and Tata Projects - all other companies have limited qualification criteria which would restrict competitive intensity. KEC is also raising capacity at its three domestic manufacturing plants - Jaipur, Nagpur and Jabalpur - by 30,000 MT, to be operational in 2HFY14E, through brownfield expansion. Post our meeting with the management, where they re-iterated their stance of recovery in operating margin driven by completion of loss making projects of power systems and railways by 2QFY14E, we remain positive on the stock. We expect KEC to post healthy operating performance over FY13-FY15E driven by robust order book position, healthy order intake, recovery in operating margin and expansion in return ratios as well as operating/free cash flows, leading us to retain our Buy rating on it with a target price of Rs68 (7xFY15E EPS).

Source : Equity Bulls

Keywords