Buy KEC International, target price Rs 520: Kotak Institutional Equities

Kotak Institutional Equities has buy call on KEC International with a target price of Rs 520. The current market price of KEC International is Rs 381.75. Time period given by analyst is a year when KEC International price can reach defined target.

KEC International, incorporated in the year 2005, is a Mid Cap company (having a market cap of Rs 9805.35 crore) operating in Power sector.

KEC International key Products/Revenue Segments include Income from Eng.Construction Contracts, Cables, Towers & Structurals, Scrap, Sale of services, Other Operating Revenue for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company has reported a Consolidated Total Income of Rs 4278.17 crore, up 27.90 % from last quarter Total Income of Rs 3345.06 crore and down -2.17 % from last year same quarter Total Income of Rs 4372.87 crore. Company has reported net profit after tax of Rs 112.04 crore in latest quarter.

Investment Rationale
The brokerage said it believes KECI is well poised to gain from upcoming opportunities in infrastructure segment given 1) diversified business model, 2) healthy market share in T&D segment, 3) excellent execution track record with strong parentage and 4) comfortable balance sheet. On account of disappointing FY22 performance and margin pressure, it has revised EPS estimate downwards by 28%/4% for FY23E/24E.

The stock is currently trading at 16.7x / 10.1x FY23E/24E earnings. However, on account of steep correction in the stock price (down 28% in 3 months), it has upgraded rating to BUY with a revised TP of Rs 520 (earlier TP of Rs 541) valuing it at 14x (its 5-year average PE) on FY24E earnings.

Promoter/FII Holdings
Promoters held 51.82 per cent stake in the company as of 31-Mar-2022, while FIIs owned 12.19 per cent, DIIs 26.39 per cent.