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R o b u s t o r d e r b a c k l o g t o k e e p g r o w t h t i c k i n g …
KEC International (KEC) declared its Q1FY12 results, which were above
our expectations. Consolidated net sales grew 21% YoY to | 1023 crore
vs. our estimate of | 996 crore. EBITDA margins at 9.4% (I-direct
estimate: 9.6%) were a tad below expectations owing to booking of
revenues from the low margins new business segments. PAT for Q1FY12
stood at | 33 crore, implying growth of 25% YoY. KEC has witnessed
robust order flows in Q1FY12. We believe this will translate into robust
revenue and profitability growth going into FY12.
ƒ High execution coupled with order inflows keep backlog robust
The order backlog for KEC grew 44% YoY on the back of | 1339 worth of
order in Q1FY12. Hence, the book to bill ratio of 1.7x provides comfort for
revenue visibility for FY12 and FY13. International markets occupy 56% of
the overall backlog while in terms of business verticals the transmission
business commands 73% of the overall backlog. KEC during Q1FY12
faced some execution issues in international backlog mainly in the MENA
region. The orders in this region are about 8% of the overall backlog.
ƒ Revenue growth to pick up, be robust but margins to contact YoY
We expect KEC to register revenue CAGR of 20% over FY11-FY13E.
However, at the same time, we expect margins to decline YoY in FY12 by
30 bps to 10.3%. This is on the back of rising input costs and high
exposure to international markets. Even rising borrowing costs would put
pressure on PAT (debt: | 1650 crore as of Q1FY12). We expect KEC to
post a PAT CAGR of 19% over FY11-FY13E.
V a l u a t i o n
At the CMP of | 79, the stock is trading at attractive valuations of 8.3x and
7x its FY12 and FY13E EPS, respectively. Until macro challenges like
rising borrowing costs and macro issues in the power sector do not get
resolved, we expect the stock to trade in this valuation range. Hence, we
maintain our earlier target price at | 97 and rate the stock as BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
R o b u s t o r d e r b a c k l o g t o k e e p g r o w t h t i c k i n g …
KEC International (KEC) declared its Q1FY12 results, which were above
our expectations. Consolidated net sales grew 21% YoY to | 1023 crore
vs. our estimate of | 996 crore. EBITDA margins at 9.4% (I-direct
estimate: 9.6%) were a tad below expectations owing to booking of
revenues from the low margins new business segments. PAT for Q1FY12
stood at | 33 crore, implying growth of 25% YoY. KEC has witnessed
robust order flows in Q1FY12. We believe this will translate into robust
revenue and profitability growth going into FY12.
ƒ High execution coupled with order inflows keep backlog robust
The order backlog for KEC grew 44% YoY on the back of | 1339 worth of
order in Q1FY12. Hence, the book to bill ratio of 1.7x provides comfort for
revenue visibility for FY12 and FY13. International markets occupy 56% of
the overall backlog while in terms of business verticals the transmission
business commands 73% of the overall backlog. KEC during Q1FY12
faced some execution issues in international backlog mainly in the MENA
region. The orders in this region are about 8% of the overall backlog.
ƒ Revenue growth to pick up, be robust but margins to contact YoY
We expect KEC to register revenue CAGR of 20% over FY11-FY13E.
However, at the same time, we expect margins to decline YoY in FY12 by
30 bps to 10.3%. This is on the back of rising input costs and high
exposure to international markets. Even rising borrowing costs would put
pressure on PAT (debt: | 1650 crore as of Q1FY12). We expect KEC to
post a PAT CAGR of 19% over FY11-FY13E.
V a l u a t i o n
At the CMP of | 79, the stock is trading at attractive valuations of 8.3x and
7x its FY12 and FY13E EPS, respectively. Until macro challenges like
rising borrowing costs and macro issues in the power sector do not get
resolved, we expect the stock to trade in this valuation range. Hence, we
maintain our earlier target price at | 97 and rate the stock as BUY.
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