Axis Securities has reiterated its BUY recommendation on KEC International Ltd. with a target price of Rs 590 per share, implying an upside potential of approximately 18% from the current market price of Rs 501. The brokerage remains constructive on the company's medium- to long-term outlook, citing a strong order backlog, a healthy tender pipeline, improving business mix, and expanding opportunities across global infrastructure markets. While short-term execution may face headwinds from geopolitical disruptions and supply-chain bottlenecks, the company's diversified order book and strategic focus on higher-value projects position it well for sustained earnings growth.

Axis Securities Maintains BUY Rating With Rs 590 Target

Investment Thesis Remains Intact Despite Near-Term Challenges

Following a recent analyst interaction, Axis Securities has maintained its positive stance on KEC International, one of India's leading EPC infrastructure companies. The brokerage has retained its target price of Rs 590 and continues to recommend the stock as a BUY.

Management's confidence stems from a combination of strong order visibility, disciplined project selection, and an expanding global opportunity landscape. Despite recent operational challenges caused by geopolitical tensions and logistics disruptions, Axis believes the company's long-term growth trajectory remains firmly intact.

Massive Order Book Provides Multi-Year Revenue Visibility

Rs 40,000 Crore Order Book Strengthens Growth Outlook

One of the strongest pillars supporting KEC's investment case is its substantial order backlog. The company's combined order book and L1 position currently exceed Rs 40,000 crore, with the Transmission & Distribution (T&D) segment contributing the majority of the backlog.

This provides management with robust revenue visibility over the next 18 to 24 months and significantly reduces business uncertainty. Based on the current execution pipeline, Axis Securities expects KEC to deliver approximately 13% revenue CAGR between FY26 and FY28.

The company has consciously shifted toward larger and more profitable EPC contracts, resulting in average order sizes increasing from approximately Rs 350 crore to over Rs 500 crore during the current year. This strategic move is expected to improve operational efficiency and strengthen working capital management.

Robust Tender Pipeline Signals Strong Future Order Inflows

Rs 1.8 Lakh Crore Opportunity Pool Creates Significant Headroom

KEC is currently evaluating a tender pipeline worth nearly Rs 1.8 lakh crore across multiple infrastructure segments.

The opportunity mix includes:

Management has set an ambitious FY27 order inflow target of Rs 30,000 crore, with approximately Rs 1,000 crore already secured. This visibility strengthens confidence in sustained business momentum over the coming quarters.

Civil Business Emerging as a Powerful Growth Engine

Legacy Project Completion Expected to Unlock Margins

Axis Securities highlighted that the Civil segment is likely to emerge as one of the fastest-growing business verticals for KEC.

Several catalysts are expected to drive growth:

Completion of legacy metro projects.
Release of locked working capital.
Better commercial terms through larger EPC contracts.
Expansion into international water infrastructure projects.
Greater use of mechanized construction techniques.

Management expects these initiatives to improve both profitability and cash-flow generation while reducing project execution risks.

Cable Division Witnessing Strong Demand Tailwinds

Renewables and Data Centers Driving Growth

The company's cable business continues to gain momentum and is projected to achieve roughly 20% revenue growth.

Management is targeting annual cable revenues of approximately Rs 2,700-2,800 crore. Growth drivers include:

Rising renewable energy investments.
Expanding data center infrastructure.
Introduction of new electronic cable products.
Launch of EU-compliant cable offerings.
Increased export opportunities following U.S. approvals.

The segment is also expected to contribute positively to margin expansion over the next few years.

Global Expansion Strategy Creating New Revenue Streams

Middle East, United States and Africa Offer Significant Opportunities

KEC continues to strengthen its international presence through a flexible market allocation strategy.

In the Middle East, the company is seeing opportunities linked to transmission networks, substations, energy infrastructure modernization, and data center investments. Saudi Arabia, UAE and Oman remain key focus markets.

The United States is emerging as a promising geography due to rising investments in data centers and high-voltage transmission infrastructure.

Africa has begun witnessing a revival in infrastructure spending, particularly in water projects, which offer better cash-flow characteristics and execution economics.

Additionally, KEC is expanding into CIS nations, targeting transmission and solar infrastructure opportunities.

Technology Adoption Improving Execution Efficiency

Automation to Offset Labour Shortages

To address industry-wide labour constraints, KEC is increasingly deploying automation technologies across projects.

The company is using:

Brick-laying robots.
Automatic plastering machines.
Specialized tower erection cranes.
Drone-based surveying systems.
Ready-Mix Concrete solutions.

These initiatives are expected to improve project execution efficiency, reduce dependence on manual labour, and enhance profitability over time.

Financial Outlook Points to Accelerating Earnings Growth

Profit Growth Expected to Outpace Revenue Expansion

Axis Securities expects strong earnings growth over FY26-FY28.

The brokerage forecasts:

Revenue CAGR of 13%.
EBITDA CAGR of 19%.
PAT CAGR of 29%.

Margin expansion is expected to support earnings acceleration, with operating margins improving from 7.1% in FY26 to nearly 7.8% by FY28.

Key Risks Investors Should Monitor

Execution and Geopolitical Risks Remain Important Variables

Despite its strong outlook, several risks could affect earnings delivery:

Geopolitical tensions in the Middle East.
Rising freight and logistics costs.
Equipment procurement delays.
Labour shortages in India.
Delayed payments in water infrastructure projects.
Right-of-Way (ROW) challenges in domestic transmission projects.

Management expects some of these disruptions to continue through Q1FY27 and potentially into Q2FY27 before conditions normalize.

Valuation and Investment View

Recent Correction Creates Attractive Entry Point

At the current market price of approximately Rs 501, KEC International trades at around 18x FY27E earnings and 13x FY28E earnings. Axis Securities values the company at 15.5x FY28E EPS and arrives at a target price of Rs 590 per share.

The brokerage believes the recent correction in the stock offers a favorable risk-reward setup for investors willing to take a medium- to long-term view. Supported by a diversified order book, expanding international presence, strengthening cable business, and improving project mix, KEC appears well-positioned to benefit from India's ongoing infrastructure expansion and global transmission investment cycle.

Research House Recommendation: BUY
Current Market Price: Rs 501
Target Price: Rs 590
Potential Upside: 18%
Sector: EPC Infrastructure
Investment Horizon: Medium to Long Term