Prabhudas Lilladher has reiterated a BUY rating on KEC International, setting a target price of Rs 911, underpinned by robust execution, a strong order book, and growth visibility across business segments. The company posted resilient Q4FY24 results, with EBITDA margins seeing improvement despite international headwinds. The core T&D and Civil segments continue to drive revenue momentum, while strategic efforts are underway to address losses in the SAE business. Backed by a healthy pipeline, continued electrification thrust, and multi-sectoral demand, KEC International is positioned as a key beneficiary of infrastructure-led economic recovery.

Q4FY24 Results Reflect Resilience and Margin Uptick

KEC International reported a consolidated revenue growth of 8.2% year-on-year to Rs 5,464 crore in Q4FY24, slightly below the brokerage’s estimate of Rs 5,604 crore. Despite international challenges and execution delays in Afghanistan and Myanmar, the company maintained solid revenue traction in the domestic T&D and Civil segments.

EBITDA stood at Rs 320 crore, up 24.2% year-on-year, translating to an EBITDA margin of 5.9%, marking a 70 basis points improvement from Q4FY23. The expansion was driven by better execution, cost efficiencies, and improved performance across the core verticals.

Net profit came in at Rs 132 crore, a sharp 53% increase year-on-year, outperforming the brokerage’s Rs 111 crore forecast. The beat was attributed to improved operating margins and controlled finance costs.

Order Book and Pipeline Signal Sustained Growth Momentum

As of March 2024, KEC's order book stood at Rs 30,838 crore, up 10.3% year-on-year, providing visibility over the next 18–20 months. T&D continues to dominate the book, but diversification is evident with growing contributions from Civil, Railways, and Oil & Gas.

The company secured orders worth Rs 20,300 crore in FY24 and has already bagged Rs 6,000 crore in the current quarter. Management remains confident of booking Rs 25,000–26,000 crore worth of orders in FY25, supported by strong bid pipelines in both domestic and international markets.

Core Business Execution Steady; SAE Drag Continues

India T&D and Civil businesses continue to lead growth, with Civil revenues up 21% year-on-year. Key wins in data centers, factories, and urban infra are adding diversity to the Civil portfolio.

The SAE Tower business, however, remains a concern. While execution improved, international challenges and cost overruns in legacy projects kept it in the red. Management expects this segment to turn around by H2FY25 with limited new exposure and better execution focus.

Railways and Cables See Stable Performance

The Railways segment posted flat growth, impacted by delays in finalizations. Nonetheless, KEC sees revival in FY25, with electrification and signaling orders under focus. The Cables division reported 14% revenue growth, driven by both volume and value increases.

Outlook and Valuation

Prabhudas Lilladher remains bullish on KEC’s multi-sector exposure, execution capabilities, and infrastructure tailwinds. The brokerage expects consolidated revenue and net profit CAGR of 10.5% and 34.7% over FY24–FY26E, respectively.

The stock is currently trading at 14.7x FY26E earnings, which the brokerage views as reasonable given the growth visibility and improving margin trajectory. The revised target price of Rs 911 implies a 25% upside from current levels, factoring in gradual recovery in SAE and sustained momentum in core operations.

Key Financials

Here’s a snapshot of KEC’s financial performance and projections:

Strategic Takeaways for Investors

BUY rating reaffirmed by Prabhudas Lilladher with a target price of Rs 911 based on 17x FY26E earnings.

SAE turnaround remains a key trigger, and progress on that front will be closely tracked in the next two quarters.

Domestic T&D and Civil segments to drive majority of growth, supported by India's infra push and diversified project pipeline.

Investors should watch out for order inflow traction and margin expansion as primary catalysts for rerating.

Conclusion
KEC International is well-positioned to capitalize on India’s infrastructure boom, with diversified verticals, a healthy order pipeline, and improving profitability. While international headwinds remain a concern, the strategic pivot to domestic execution and Civil infra provides a compelling long-term story. Investors with a medium to long-term horizon can look at KEC as a solid infrastructure play with attractive upside potential.