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  • Stock recommendation: KEC International — Buy — Target price Rs 410

    Publish date: August 7, 2018

    Results update: A telling quarter

    KEC International took all the challenges in its stride to emerge unscathed.

    The company battled GST, rising interest cost and sharp dip in the transmission and distribution (T&D) segment to emerge with a flying first quarter performance.

    With the headwinds behind them now, the management are hoping to deliver even stronger performances going forward. They are especially banking on the railway segment to drive future growth.

    Key Highlights

    • A sharp decline in T&D revenues (12.2% YoY) nonetheless, the company reported a healthy EBITDA margin of 9.3%.
    • The company’s working capital diminished due to higher inventories and lower payables. The receivables were also impacted due to delay in receiving payment from contracts in Saudi Arabia.
    • Interest cost grew by 9% but it was slower than the revenue growth, which was at 11%.
    • The company’s net profit grew by 38% (YoY).
    • The company also bagged orders worth Rs 2,700 crore in the first quarter.
    • The management expects the company to register double-digit growth going faorward. That’s because they feel the T&D revenues will pick up and that the commodity prices will favor them in coming quarters.

    Valuation & outlook

    We expect the company to delivery strong results a year from now because order inflows are yet to hit its stride.

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