Diversified order book: Order book for the company stood at Rs92bn, up
16% YoY. Transmission line contributed 69.9% of the order book, Power
systems contributed 17.9% and other initiatives like Railways, Water etc.
contributed 12.2%. The order inflow for the quarter stood at Rs20bn (up
51% YoY); this is the third consecutive quarter with strong inflows. 24% of
the total order inflows came from its new business initiatives like power
system, cable, telecom and water segments. Transmission segment got the
biggest order worth Rs4bn from Kazakhastan. It managed to get orders
across segments and geographies. The diversified nature of order book in
across customers base and geographies gives it flexibility to cushion the
impact slowdown and make the most of up cycle.
New initiatives bearing fruits: KEC has taken up various new initiative over
the few years by getting into new business like sub‐station segment, water
business, Balance of Plant and railways. KEC has also entered in the CIS
region by securing the largest ever order of Rs9.42bn from Kazakhstan.
This order gives KEC an entry into 1150kV to 110kV sub-station at the
entire range. This new initiatives will secure the future growth of the
company as KEC has ambition to scale up each of this new business to
~Rs5-10bn in 3-4 years time. The contribution of orders from this new
business increased to 30% from ~21% at the start of FY11.
SAE tower: KEC acquired SAE tower in Sep 2010. The company has been
able to scale up the operation of SAE successfully, with revenue of Rs9.1bn
and order book of Rs7.5bn in FY12. It has also been able to maintain
EBITDA margin for SAE above 13%. SAE enjoys highest markets share in
Brazil, United States and Mexico. It will help KEC to scale up its presence in
this markets with high entry barriers successfully.
Valuation: We believe that strong order book, huge pipe line of orders and
ability to win orders in the current environment gives comfort on revenue
visibility. We expect the stock to post earnings CAGR of 15.5% over FY12-
14E. Improved working capital and debt management will help continue to
outperform.
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