Brokers' call: Espirito turns 'Neutral' on KEC International

Espirito Santo Securities has downgraded KEC International from 'Buy' to 'Neutral' with a target price of Rs 69.

"KEC has been our preferred pick in the T&D EPC space on the back of its diversified presence across products and geographies. We expect the order flow momentum to continue given significant investments planned in the Power T&D and water space. However, growth in order flows/ revenues has come at the expense of margins as the company is still in the process of building pre-qualifications in its new businesses. We believe margin recovery will be gradual until these new businesses gain scale. The stock is up 60% in the past year and i now factors in the robust order book growth and improving business model, and we believe the runup limits further upside potential from current levels. Hence, we downgrade KEC from 'Buy' to 'Neutral' with a revised FV of Rs 69/ share (Rs 70 earlier). We would need to see a sustained recovery in margins before turning positive on the stock again," the brokerage said in a report.