KEC International - Q2FY21 First Cut - ICICI Direct

(CMP: Rs. 329, MCap: Rs. 8455 crore)

KEC reported a decent set of numbers for Q2FY21 numbers which came in better than our estimates on the revenue front led by better execution in non-T&D segment while T&D segment remained flat. However, margins saw some impact on the back of higher than expected operating cost. KEC's YTD order inflow came in at Rs. 4366 crore, up 16%, YoY.

Q2FY21 Earnings Summary

- The topline came in at Rs. 3257.7 crore which grew by 16% on YoY basis, (above our estimate of Rs. 2875.8 crore with normalization of operations. During Q2FY21, the overall T&D business (including SAE tower) revenue remained flat on YoY basis at Rs. 1977 crore. While Non-T&D business (Railways, Civil, Cables, other) registered a robust growth of 52% to Rs. 1349 crore, on YoY basis led by better execution. The railways business revenue came in at Rs. 821 crore, up 45% while civil business segment revenue multifolded to Rs. 212 crore, registering a growth of 306% on YoY. Cables business remained flat at Rs. 249 crore, YoY. Overall, T&D contributed 59% followed by railways (25%), Cables (7%) and Civil (6%) to revenues

- KEC's YTD order inflow came in at Rs. 4366 crore, up 16%, YoY while Q2FY21 inflows came in at Rs. 2435 crore, down 8% on YoY. The unexecuted order book as on Q2FY21 stood at Rs. 19515 crore, while the company is L1 in orders worth Rs. 3500 crore. T&D business contributed 57% to order book while non- T&D contributed 43% to order book. On the order inflow front, T&D contributed 79% followed by Civil (6%) and Cables (9%). Geographically, International order inflows contributed 59% and Domestic contributed 41%

- EBITDA margins came in at 9.0% (below our estimate of 9.6%), down by 150 bps on a YoY basis impacted by substantial increase in contracting expenses, while absolute EBIDTA came in at Rs. 293.1 crore, which remained largely flat on YoY basis. Sharp increase in commodity prices noticed Q2FY21 onwards

- Interest cost decreased by 17.9% YoY to Rs. 67.4 crore leading to interest to sales ratio to decline by 80bs on YoY to 2.1%. KEC's Net Debt (excluding acceptances) has increased marginally by Rs. 37 crore, sequentially to Rs. 2425 crore, as on September 30, 2020. Net working capital days stands stable at 132 days on QoQ basis led by judicious monitoring of cash flows and focus on collection of receivables and focus on project closures

- PAT came in at Rs. 142.6 crore (below our estimate of Rs. 127.2 crore) which grew by 2.2% on YoY basis on account of tax adjustment in base quarter and higher other income which grew by 88.6% to Rs. 6.8 crore on YoY basis

KEC has delivered strong performance in non-T&D business segments like railways and Civil during the quarter which supported overall performance for the quarter. While the T&D segment has shown some green shoots of revival.

We would be coming out with a detailed report post the conference call.

Shares of KEC INTERNATIONAL LTD. was last trading in BSE at Rs.329.8 as compared to the previous close of Rs. 325.45. The total number of shares traded during the day was 10138 in over 695 trades.

The stock hit an intraday high of Rs. 331.45 and intraday low of 325. The net turnover during the day was Rs. 3338451.

Source : Equity Bulls

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