Earnings Update - KEC International (KECI IN) - Robust quarter; driven by strong growth in railway segment - CSEC Research

Robust quarter; driven by strong growth in railway segment

- Revenue registered a growth of 10.1% YoY at INR 28.8bn due to the strong growth in Railway segment (+312% YoY at INR 2.06 bn) and Solar segment.

- T&D business increased by 5.5% to INR 23bn on the back of strong order wins. Other verticals such as Infrastructure (+166% YoY) at INR 2.3 bn, Solar (+15.4% YoY) at INR 0.6 bn and cables (-7.1%) at INR 3 bn witnessed strong growth.

- KEC has reported a strong order intake momentum growing by 42%YoY to INR 123.6bn in YTD FY17. Consequently, company's order book as of 31st March 2017 stands at INR 126.3bn with L1 orders being reported in excess of INR 33bn. Management guided for order inflow of INR 125 to INR 130 bn in FY18.

Valuation: Recovery of margins in SAE segment, good traction in Railways & Solar segment and healthy T& D order pipeline from select SEB's to aid company post healthy revenues. At the current market price KEC is trading at a P/E of 14.9x its FY19E. We assign a P/E of 17x its FY19E to arrive at a target price of INR 279 and rate the stock as BUY.

Risks: Delay in domestic project execution, political unrests in foreign markets and adverse commodity price movements.

Shares of KEC INTERNATIONAL LTD. was last trading in BSE at Rs.254.35 as compared to the previous close of Rs. 252.2. The total number of shares traded during the day was 72800 in over 2258 trades.

The stock hit an intraday high of Rs. 257.7 and intraday low of 251. The net turnover during the day was Rs. 18580436.

Source : Equity Bulls

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