KEC International Q1 Results Review - Strong Order Book Outlook; Execution A Watch-Out: Nirmal Bang

Nirmal Bang Report

KEC International Ltd.'s Ebitda margin was below our estimate by 114 basis points – mainly due to underperformance in the cable segment.

Transmission and distribution and Solar are expected to remain key growth drivers in the medium term, with strong order book visibility and efficient execution. Buoyant traction due to the thrust on renewables is expected to drive the domestic order book.

Collections of ~Rs 160 crores have been made from Afghanistan, with almost ~Rs 200 crore yet to be recovered.

Aluminium Conductor plant in cables is expected to start in Q3 FY25. The cables segment is expected to post ~20% CAGR top line growth, with margins expected to land at ~9.5% over the medium term.

The railways segment is expected to deliver subdued performance in the medium term on the back of increased competition and delays in collections period.

We maintain Accumulate with a revised target price of Rs 935. This implies a PE of 20 times on June’26E EPS and it is at ~35% discount to the five-year historical average PE multiple on 1-yr forward basis.

We believe that the multiple is fair. Near term outlook remains challenging, mainly due to the pain in the railways segment. We expect meaningful margin improvement from FY26 onward as orders will begin to flow in, on the back of infrastructural spends, and execution will pick up pace.

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