Target: ₹776
CMP: ₹895
KEC International posted robust growth in revenue from operations in Q4-FY24 at ₹6,165 crore, with a growth rate of 11.6 per cent. The major business came from T&D, which contributed 55 per cent to the overall topline. The company secured orders of nearly ₹6,500 crore in Q4 comprising mostly of T&D and civil orders. For SAE, PBT was positive in all the four quarters of FY24.
Despite the challenges pertaining to paddy crops, floods and RoW issues, KEC commendably commissioned the Warora-Kurnool Transmission Line project spread over Telangana, Andhra Pradesh and Maharashtra in Q2-FY24.
The stock currently trades at 43x FY25e EPS of ₹19.92 and 27.6x FY26e EPS of ₹31.04. Revenue will mostly grow due to surge in domestic T&D activities and civil construction. The company also sees opportunities in upcoming projects of government, which aim at boosting infrastructural development in the country and developing resources to increase the usage of renewable energy.
Given an uptick in earnings, ROE is pegged at 13 per cent in FY25 and 17.8 per cent in FY26.
Despite higher-than-expected margins, earning estimate for the current fiscal has been cut by a fifth. Balancing odds, we maintain ‘hold’ rating on the stock with revised target of ₹776 (previous target of ₹602) based on 25x FY26 earnings.