KEC International Ltd announced on Monday that it has won three substation orders worth Rs980 crore. Last week, the company had won orders of Rs1,018 crore. This takes the total order book to Rs7,500-8,000 crore, say analysts, after adjusting for estimated revenue for the December quarter. Needless to say, these orders improve the company’s revenue prospects.
A key positive from the latest substation order win is that post-completion of the project, KEC would emerge as a pre-qualified bidder for substations of voltage level 1150kV projects, said John Perinchery of Angel Broking Ltd.
KEC’s stock was up by 1% to Rs105.65 per share on a day when the Sensex index of the Bombay Stock Exchange was up by 0.25%. However, since the beginning of the fiscal, the stock has underperformed the BSE-500 and BSE Capital Goods indices.
Graphic: Yogesh Kumar / Mint
But then, other stocks in the space, such as Jyoti Structures Ltd and Kalpataru Power Transmission Ltd, too, have underperformed.
A concern surrounding KEC is declining margins, which are coming under pressure on higher competition. For the half year ended September, consolidated operating profit margins fell by one percentage point to 10%. Margins were affected because all components of costs, excluding erection and subcontracting expenses, rose. Profitability, too, was not impressive, with profit before tax and extraordinary items increasing by just 1.6% year-on-year.
In September, KEC acquired US-based SAE Towers Holdings Llc, which enjoys higher operating margins, thanks to comparatively lower competition in the US market. Analysts expect the positive impact of SAE’s higher margins to flow in KEC’s numbers in the coming quarters.
It goes without saying that better financial performance would be better in the future. That apart, higher order inflow, too, would improve share performance.