KEC’s strategy of a diversified business model across geographies has augured well over the past five-six years; management targets to take most of the new businesses on a global scale, which provides greater flexibility to choose between markets and businesses. We revise up our FY14E EPS 4% building in superior margins and expect the company to continue its outperformance versus peers over the medium to long term.
KEC has a healthy order book of INR94bn (book to bill), 1.4x FY13E sales, which imparts sufficient visibility for the next 16-18 months. Also, cables, railways, and water divisions are expected to grow higher than T/L revenues with 30% CAGR over FY12-14E versus 13% CAGR for T/L revenue owing to low base and decent order inflow. While profitability of T/L is likely to remain stable, it is expected to improve for most new businesses (railway, cables, water) FY14 onwards on better operating leverage.
Hold the Stock for a Target Price of Rs 80
