Buy KEC International, target price Rs 550: Centrum Broking

Centrum Broking has a buy call on KEC International Ltd. with a target price of Rs 550. The current market price of KEC International Ltd is Rs 399.3. The period given by the analyst is 2-3 years when KEC International's price can reach the defined target.

KEC International, incorporated in the year 2005, is a Mid Cap company (having a market cap of Rs 1,0376.09 crore) operating in the power sector.

Investment Rationale
The 40-50% surge in steel, aluminum and copper prices in YTDCY22 are fresh margin headwinds for KEC, given that 20% of its backlog comprises fixed price orders.


That said, the losses for the company's SAE’s Tower business are unlikely to continue beyond Q4FY22, which offers a cushion. YTD FY22 order inflows have been robust at Rs 153 billion strengthening the backlog to Rs 244 billion (Dec-21; 1.7x TTM revenue).

The brokerage maintains its execution estimates but cut FY23E/24E EBITDA margin estimates by 110bp/40bp to 8.8%/9.8% (9MFY22: 6.9%). Despite near term margin headwinds, the stock appears attractive from a 2-3 years horizon. Credible track record, good governance and diversification into technologically enabled areas are key strengths.

Financials
For the quarter ended 31-12-2021, the company has reported a Consolidated Total Income of Rs 3345.06 crore, down -6.84% from last quarter Total Income of Rs 3590.75 crore and up 1.58 % from last year same quarter. Total Income of Rs 3293.14 crore. Company has reported net profit after tax of Rs 93.61 crore in latest quarter.

Promoter/FII Holdings
Promoters held 51.82 per cent stake in the company as of 31-Dec-2021, while FIIs owned 12.25 per cent, DIIs 26.35 per cent.