KEC International (Q1FY21) - BUY (Target Rs355, Upside 21%)
KECI's sales came in at Rs22bn, 8.5% down yoy (+8% vs our est.) as Apr'20 sales impacted significantly due to COVID-19 disruption, however sales of May'20 and June'20 were better yoy. Order book (incl. L1 of ~Rs50bn) stood at Rs245bn (+5% yoy). Order inflow was Rs19.3bn in YTDFY21 (+73% yoy). PAT came in at Rs708mn, down 20% yoy (+43.4% vs our est.). Order pipeline is looking strong at ~Rs300bn. KECI has already submitted bids for projects worth ~Rs300bn & expects realization of the same within next few months. Though domestic T&D is showing weakness, KECI is expecting good traction in International T&D especially MENA & SAARC regions. Major solar and wind projects are expected in Saudi Arabia, UAE, Oman, Egypt, and Jordan. Re-bidding of green energy corridor is likely to happen in 2-3 quarters. KECI is also eying for large water projects from states like Orissa, Gujarat, Madhya Pradesh & Rajasthan. KECI derives majority of projects from agencies like PGCIL, Indian railways (RVNL/RITES), Metro Corp, and Multilateral banks, which in our view would be relatively less impacted by the pandemic. It would also benefit from upgradation of rail infra, rising electrification, DFCC project, metro & smart infra projects.
We remain positive on KECI given its diversified & healthy order backlog, ability to bag orders in tough times & proven execution track record. KECI is moving towards digitalization through automation drive at its project sites, which could lead to margin expansion in medium term. We are upgrading our FY21E/FY22E estimates by 24%/14% respectively to factor in the performance beat in Q1FY21, minor impact from Covid related disruptions & strong bidding pipeline. KECI is trading attractively at ~11.6x FY22 EPS, vs long term avg. 1-yr forward P/E of 14x. Retain 'BUY' with revised TP of Rs355 at 14x FY22 EPS.
Shares of KEC INTERNATIONAL LTD. was last trading in BSE at Rs.292.45 as compared to the previous close of Rs. 273.95. The total number of shares traded during the day was 140629 in over 5647 trades.
The stock hit an intraday high of Rs. 295 and intraday low of 275.75. The net turnover during the day was Rs. 40842337.