KEC International Q3 Results Review - Legacy Projects Continue To Affect Margins: Motilal Oswal

Motilal Oswal Report

KEC International Ltd.'s Q3 FY24 result came in lower than our expectations because of supply chain issues led by the Red Sea conflict and muted execution in the railways segment. Revenue grew 14% YoY to Rs 50 billion, missing our estimate of Rs 52.6 billion.

Ebitda margin at 6.1% was flat QoQ and was lower than our estimates for the quarter. Profit after tax growth of 449% YoY came on a low base. We expect KEC International to continue to benefit from the strong domestic transmission and distribution tendering pipeline. It would also remain focused on reducing its working capital.

However, shifting of margin improvement guidance to FY25 results in earnings cuts of 18%/6%/5% for FY24/25/26E.

We arrive at our revised target price of Rs 670 based on 16 times March 26E earnings. Reiterate 'Neutral'.

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