Legacy projects continue to affect margins

Company
11 Mar 2024
5 Min read 
  • KEC International's 3QFY24 results were lower than expected due to supply chain issues and muted execution in the Railways segment.
  •  Revenue grew 14% YoY to INR50b, missing estimates.
  •  EBITDA margin was flat QoQ and lower than expected.
  •  PAT growth of 449% YoY came on a low base.
  •  The company expects to benefit from a strong domestic T&D tendering pipeline and plans to reduce working capital.
  •  However, margin improvement guidance has been shifted to FY25, resulting in earnings cuts for FY24/25/26E.
  •  The company has an order book of INR301b and is L1 in an additional INR8b of tenders.
  •  The Railways segment continues to be sluggish due to increased competition and spending on locomotives and wagons.
  •  The company expects a revenue CAGR of 16% over FY23-26 and improved return ratios.
  •  The stock is currently trading at a P/E of 23.2x on FY25E earnings.
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