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O n e - o f f s b u o y p r o f i t a m i d s t r o n g e x e c u t i o n …
KEC International’s (KEC) Q3FY12 results were a mixed bag, with
superior execution coming as a positive surprise while continued
pressure on margins played the spoil sport. KEC reported net revenues
of | 1,459 crore against our expectation of | 1,375 crore. However, on
the margins fronts, it registered an EBITDA of | 112 crore (7.6%) against
our expectation of | 127 crore. Consequently, lower margins coupled
with high interest costs led to PAT (on an adjusted basis) of | 27 crore
(I-direct estimate: | 48 crore), implying a YoY decline of 53%. On a nonadjusted basis, PAT came in at | 80.6 crore, which includes a one-time
profit on sale of land in Vashi of | 53.8 crore.
ƒ Solid backlog to ensure revenue growth, going ahead…
With order inflows of | 2,500 crore during the quarter and a robust order
book backlog at | 9,200 crore (a 15% YoY increase), revenue visibility for
FY13 remains intact (with book to bill ratio of 1.7x based on TTM
revenues). On the back of a strong order book, we expect revenue CAGR
of 18% over FY11-13E. Out of the total order backlog, the transmission
segment commands the highest share at 67% followed by power systems
at 23%. During Q3FY12, SAE Towers witnessed a 76% YoY rise in
revenues and is running at 85% capacity utilisation levels.
ƒ …but improvement in EBITDA margin to be gradual
EBITDA margins at 7.7% were below our expectations. This was primarily
on account of a high share of fixed price international orders and high
input prices. Going ahead, margins are expected to pick up but at a
gradual pace. We expect margins to range at 8.5-8.7% over FY12E-FY13E.
V a l u a t i o n
Better than expected revenue booking and 15% YoY rise in order backlog
provides comfort on the growth front. Any improvement in EBITDA
margins and movement in working capital will be a positive catalyst. We
value the stock at 8x FY13E EPS to arrive at a target price of | 68/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
O n e - o f f s b u o y p r o f i t a m i d s t r o n g e x e c u t i o n …
KEC International’s (KEC) Q3FY12 results were a mixed bag, with
superior execution coming as a positive surprise while continued
pressure on margins played the spoil sport. KEC reported net revenues
of | 1,459 crore against our expectation of | 1,375 crore. However, on
the margins fronts, it registered an EBITDA of | 112 crore (7.6%) against
our expectation of | 127 crore. Consequently, lower margins coupled
with high interest costs led to PAT (on an adjusted basis) of | 27 crore
(I-direct estimate: | 48 crore), implying a YoY decline of 53%. On a nonadjusted basis, PAT came in at | 80.6 crore, which includes a one-time
profit on sale of land in Vashi of | 53.8 crore.
ƒ Solid backlog to ensure revenue growth, going ahead…
With order inflows of | 2,500 crore during the quarter and a robust order
book backlog at | 9,200 crore (a 15% YoY increase), revenue visibility for
FY13 remains intact (with book to bill ratio of 1.7x based on TTM
revenues). On the back of a strong order book, we expect revenue CAGR
of 18% over FY11-13E. Out of the total order backlog, the transmission
segment commands the highest share at 67% followed by power systems
at 23%. During Q3FY12, SAE Towers witnessed a 76% YoY rise in
revenues and is running at 85% capacity utilisation levels.
ƒ …but improvement in EBITDA margin to be gradual
EBITDA margins at 7.7% were below our expectations. This was primarily
on account of a high share of fixed price international orders and high
input prices. Going ahead, margins are expected to pick up but at a
gradual pace. We expect margins to range at 8.5-8.7% over FY12E-FY13E.
V a l u a t i o n
Better than expected revenue booking and 15% YoY rise in order backlog
provides comfort on the growth front. Any improvement in EBITDA
margins and movement in working capital will be a positive catalyst. We
value the stock at 8x FY13E EPS to arrive at a target price of | 68/share.
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