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5.30 AM Jan 1st 1970

KEC Intl

BSE ID : 532714     NSE ID : KEC

RECOMMENDED PRICE 119.80

PEAK FROM RECO 698.95 483.43%

CURRENT PRICE 662.70 Resource id #11

KEC International is a major player in the infrastructure segment specializing in EPC projects. The share is recommended to invest at around Rs. 120 per share with the target price of Rs 175 in the next 12-18 months.

KEC International Limited

Company Overview:

KEC International is part of the RPG group under the wing of Harsh Goenka. It is a major player in the infrastructure segment specializing in EPC projects. It is a company with over 6 decades of experience and has grown through Mergers and Acquisitions. KEC has got a growing presence in five verticals namely Power systems, Cables, Telecom, Railways and Water. Unlike many other Indian infrastructure players KEC has over time developed global presence with its foot prints in 50 countries. It has eight manufacturing facilities spread over India, Brazil, Mexico etc. About 60% of its turnover comes from outside India. This gives the company good flexibility in its business profile in terms of relative contribution to its business. It is however, still highly focused on Power Transmission and Distribution.

Financial Analysis:

For the year ended March 31, 2014 the company had net sales of Rs.7902 crores and an EBITDA of Rs.493 crores. The net sales represented a 13.2% growth over FY2012-13 while the EBITDA showed much more handsome improvement of 29.3%. The EBITDA margin for the year itself improved a tad from 5.5% to 6.2%. The profit after tax remained flat at 67 crores.

The financial position of the company though good showed slightly high debt and receivable level. The gross debt of the company was Rs.2127 cores as compared to its net worth of Rs.1192 crores, which is a matter of concern. The number of receivables days has also gone up from Rs.179 crores to Rs.200 crores in FY2013-14.

Outlook:

The order book of the company is strong and stands at Rs.10200 crores on date, an improvement over Rs.9470 cores at the end of FY2012-13. There has been a growth of 17% CAGR in the order book over last five years. The future outlook of the company is promising considering the tremendous emphasis which is being placed on power generation and transmission in India. Apart from new capacity in generation and transmission, investment is also required in replacement of existing aged networks. Apart from Power T&D, the outlook for the Power and Telecom cables is very bright. The other growing businesses of the company namely Railways and Water also have huge investment potential.

Recommendations:

KEC is one of the success stories of the Indian infrastructure sector. Its experience, expertise and global reach make it a very good investment candidate. The share price has run away a little bit in the last few months along with other good midcap stocks and it is trading close to its 52-week high. Having said that the company’s profits are still far below what it used to make when Indian growth was high and there is no reason why we should not see a strong growth in profits in the coming years as investment in infrastructure in the Indian economy picks up. The share is recommended to invest at around Rs. 120 per share with the target price of Rs 175 in the next 12-18 months.

Disclaimer: The stock does not find a place in client and personal portfolios. Investors are requested to take the advice of a qualified Investment Advisor before making any investment.

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