KEC International shares clock 52-week high; what's driving the EPC stock?

Engineering, procurement and construction company KEC International's shares were in high demand on Wednesday after the RPG group company bagged orders totaling more than Rs 2,100 crore, further strengthening its record order book. KEC International shares jumped by Rs 74.6, or 11.2 per cent, to touch Rs 739 apiece at the strongest level of the day on BSE, crossing an earlier peak of Rs 699 apiece scaled last month.

The stock settled with a gain of 2.8 per cent at Rs 682.9 apiece on the bourse.

In a regulatory filing during market hours on Wednesday, the company said it had secured a prestigious turnkey order of Rs 1,145 crore in its transmission and distribution (T&D) business. 

“We are delighted with the significant order win in the international market... With this order, Saudi Arabia continues to be a major growth driver in the Middle East region. This strategic project holds immense significance for both NEOM and Saudi Arabia, as it plays a pivotal role in developing the power infrastructure required for the development of NEOM—a visionary city in Saudi Arabia," said Vimal Kejriwal, MD and CEO, KEC International.

That deal was on the back of orders worth Rs 1,012 crore that the company bagged across its various businesses the previous day, including "prestigious orders" in the areas of data centres and FMCG, according to a separate filing the previous day. 

KEC International said its total orders for 2023 so far reached a record level. With the latest wins, the order intake stood at more than Rs 7,500 crore on a year-to-date basis, translating to a year-on-year increase of 30 per cent, according to the company.

KEC International's latest order wins 

The order worth Rs 1,145 crore involved the design, supply, and installation of a 380 kV overhead transmission line in the Kingdom of Saudi Arabia, the company said. 

In the civil segment, KEC International won orders to build a data centre in Western India and to set up a manufacturing facility for a global FMCG major in the southern part of the country. 

In the transmission and distribution (T&D) space, the company won orders involving a 765 kV transmission line in the country from an existing private client, and the supply of towers, hardware and poles in the Americas. 

The RPG group flagship also said its cables unit secured orders for the supply of various types of products in the domestic as well as foreign markets.

The KEC International stock raced several analysts' targets set in the recent past. 

What analysts make of KEC International

"These companies are getting orders and the market is rewarding them... As long as there is consistent order inflow, the stock could do well," said Vishal Periwal, Head-Institutional Research at IDBI Capital Markets. 

Earlier on Wednesday, Zee Business analyst Ashish Chaturvedi recommended an intraday 'buy' on KEC International with a price target of Rs 685 and a stop loss at Rs 660. 

Analysts at Nirmal Bang, which maintained an 'accumulate' call on KEC International last week with a price target of Rs 705, the EPC company's outlook continues to be strong from a medium-term perspective, underpinned by its robust order book though execution remains key. "With exposure to legacy projects largely reduced, we expect margin improvement to continue in the near term as KEC commences execution of projects booked at current commodity prices," the analysts wrote in a research report dated September 8. 

The brokerage values KEC International at 15 times its earnings per share (EPS) estimate for the quarter ending March 2025.

According to Geojit Financial Services, which held an 'accumulate' rating on the stock with a price target of Rs 703 after the company's earnings announcement, a pickup in execution along with an improvement in margins will support its earnings growth.

"The government's thrust on capex spending and a revival in private capex provide ample impetus to the sector," analysts at Geojit Financial Services wrote in a research report last month. The brokerage, which values the stock at a price-to-earnings multiple of 20 times, is positive on the company from a long-term perspective, citing improvement in T&D execution, and a healthy order book.

How KEC International fared in Q1

KEC International reported an overall positive set of financial results for the quarter ended June 30. Its net profit, for the first quarter of the current financial year, grew 35.4 per cent on a year-on-year basis to Rs 42 crore, and revenue increased 27.9 per cent to Rs 4,244 crore, according to a regulatory filing.

The company registered Rs 244 crore in earnings before interest, taxes, depreciation and amortisation (EBITDA), marking a jump of 45.1 per cent compared with the year-ago period. Its margin improved by 64 basis points to 5.7 per cent.

KEC International's management guided for revenue of more than Rs 24,000 crore, on the back of the execution of its robust order book. The infrastructure company expects its margin to improve to 6 per cent in the April-September period, and to 8 per cent in the second half of the financial year supported by strong execution and moderation in commodity rates.

What does KEC International do?

KEC International, an infrastructure major, operates in areas such as power transmission and distribution (T&D), railways, civil, cables, and oil and gas pipelines.     

Currently, the company is executing infrastructure projects in more than 30 countries, according to a statement. 

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