KEC International - Q1FY14 Results - Nirmal Bang Institutional

- KEC reported 1QFY14 revenue of Rs17.4bn, a strong growth of 28% YoY. The top-line was 15.8%/16.4% higher than our estimate and Bloomberg consensus. The strong top-line was driven by 20.6% YoY jump in revenue from power transmission segment (69% of total revenue) and 92.6% YoY jump in revenue from power systems segment (18% of total revenue).

- EBITDA fell 14.7% YoY to Rs881mn, on expected lines, as KEC is booking low margin contracts from new business segments in 1HFY14, as evident from the fact that raw material cost as a % of sales rose to 75.2% in 1QFY14 compared to 71.5% in same quarter last year.

- The operating margin stood at 5%, a decline from 1QFY13's margin of 7.6% but an improvement from 4QFY13's margin of 4.1%. We were expecting operating margin of 6.1% for the quarter and the miss is likely due to 25% YoY rise in other expenses (forex loss is a possibility). In absolute terms, EBITDA stood 4.2% below our estimate but 7.2% above Bloomberg consensus.

- The company booked an exceptional cost of Rs182mn (Rs120mn net of tax) as VRS expenses for closure of cable manufacturing plant in Thane (plant was closed in Feb 2013 and production was relocated to new factory in Vadodara). Including this exceptional cost, KEC reported net loss of Rs88mn for the quarter.

Source : Equity Bulls

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