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KEC International
Capitalizing on global opportunities; initiate with Buy
We initiate coverage on KEC International with Buy and target
price of `122/share. It is our top-pick in the sector as it is well
perched to capitalize on the robust power sector opportunity in
India as well as in emerging and developed markets. Orders
from railways-, telecom-, BoP-, and water-related projects would
be key growth drivers. We value KEC at 14x FY12e EPS.
Balanced order book mix. KEC has a relatively balanced order
book mix, equally distributed among domestic and overseas
orders. With the highest order backlog ever, of `70bn in Sep ’10,
KEC is well placed to capitalize on the ~`1.5trn EPC opportunity
in India over the next five fiscals. Also, system-strengthening
projects in emerging markets and replacement demand in
developed markets would aid order book growth.
M&As. KEC benefits from cost synergies and enhanced control
on project execution with the merger of its transmission tower,
cable and telecom tower businesses. The recent acquisitions (Nov
’10) of SAE Towers and Jay Signaling would aid entry in American
markets and bidding for railway electrification jobs in India.
Financials. We estimate revenue and earnings CAGR of 18% and
20% respectively over FY10-13; also, we expect RoE of +20%.
Valuation and risks. Our price target of `122/share is based on
14x FY12e earnings. KEC trades at +25% discount to its five-year
average PE of 13-14x one-year-forward earnings. Key risks: rising
interest rate & commodity prices; forex fluctuations; competition
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
KEC International
Capitalizing on global opportunities; initiate with Buy
We initiate coverage on KEC International with Buy and target
price of `122/share. It is our top-pick in the sector as it is well
perched to capitalize on the robust power sector opportunity in
India as well as in emerging and developed markets. Orders
from railways-, telecom-, BoP-, and water-related projects would
be key growth drivers. We value KEC at 14x FY12e EPS.
Balanced order book mix. KEC has a relatively balanced order
book mix, equally distributed among domestic and overseas
orders. With the highest order backlog ever, of `70bn in Sep ’10,
KEC is well placed to capitalize on the ~`1.5trn EPC opportunity
in India over the next five fiscals. Also, system-strengthening
projects in emerging markets and replacement demand in
developed markets would aid order book growth.
M&As. KEC benefits from cost synergies and enhanced control
on project execution with the merger of its transmission tower,
cable and telecom tower businesses. The recent acquisitions (Nov
’10) of SAE Towers and Jay Signaling would aid entry in American
markets and bidding for railway electrification jobs in India.
Financials. We estimate revenue and earnings CAGR of 18% and
20% respectively over FY10-13; also, we expect RoE of +20%.
Valuation and risks. Our price target of `122/share is based on
14x FY12e earnings. KEC trades at +25% discount to its five-year
average PE of 13-14x one-year-forward earnings. Key risks: rising
interest rate & commodity prices; forex fluctuations; competition
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