Broker’s call: KEC Intl (Hold)

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Target: ₹602

CMP: ₹656.60

KEC International order book stood at ₹30,125 crore as on June 30, 2023 (excluding L1 positions of over ₹4,875 crore) diversified across businesses, with domestic market contributing 71 per cent to overall mix. Order intake for Q1FY24 was ₹4,500 crore exhibiting a growth of 29.6 per cent year-on-year with 76 per cent secured from domestic markets.

On the back of robust growth in order book and healthy execution in T&D and civil business, KEC clocked in revenue of ₹17,281.71 crore in FY23 as against ₹1,3742.26 crore in FY22 exhibiting a growth of 25.8 per cent. Working capital requirement over the past few quarters has been elevated mainly due to fixed priced contracts and some delay in collection of receivables related to railways projects. But in Q1-FY24 net working capital fell on the back of softening of input prices and improvement in SAE business.

Debt will remain subdued due to softening of commodity prices and better order book mix which in turn will also help in improving working capital days. Yet friction in order execution due to external factors coupled with little specialisation in execution of complex orders in railways may constrict margins. Balancing odds, we maintain ‘hold’ rating on the stock with target price of ₹602 (previous target ₹374) based on 24x FY25e EPS.