India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
KEC International: Management meet update: Playing well in international markets…
We recently met the management of KEC International (KEC) to
understand the company’s business and future plans. KEC undertakes
projects in the power transmission, power distribution, railways and
telecom sector. KEC has a sizable international presence having
executed power transmission projects in over 40 countries. As of now,
70% of the order backlog comprises orders from the transmission
sector (includes orders from domestic as well as international markets)
while the remaining consists of the power distribution segment (20%)
and railways & cables (10%). From a geographical perspective,
international orders comprise 60% of the total order book. In YTDFY11,
KEC witnessed robust order flows to the tune of | 4300 crore. KEC has
been focusing on the international business as it recently acquired SAE
Towers, thereby making its space in the US markets. The acquisition
has already started delivering as KEC recently bagged an order worth |
735 crore in the Canadian market. The company is also keen on
expanding in the non-power related verticals like the railway business
(acquisition of a signalling company, thereby making KEC a fully
integrated player in the railway segment). The company expects these
verticals to start delivering in a meaningful way from FY12.
Order inflows robust dominated by transmission segment
KEC has witnessed order flows to the tune of | 4300 crore in YTDFY11.
Total 60% of these orders have flown in from countries like Canada and
Kazakhstan. Even in domestic markets, the company has recently won
orders from PGCIL and various state utilities. The company expects
increased ordering in the domestic markets mainly from PGCIL’s end but
has cited heightened competition from domestic players. We expect that
a reasonable book to bill ratio will result in smooth execution and ensure
revenue growth in line with historical trends. On margins, KEC expects to
maintain its EBITDA margin at ~10% as high raw material prices will
negate the positive impact of robust execution.
Non-power business to start delivering from FY12 onwards
FY10 and FY11 have been marked by a series of events that have
strengthened KEC’s manufacturing capabilities in the non-power related
business. These include merger with RPG Cables and acquisition of Jay
Signalling Pvt Ltd (adding capabilities for railways signalling projects). The
order book for the railways business stands at | 400 crore. Along with
traction from the cables business, this will get reflected from FY12.
View
Robust order inflows, a good foothold in international markets, recent
inorganic initiatives and stable margins provide a positive outlook. We do
not have a rating on the stock.
No comments:
Post a Comment