KEC’s Q4FY09 results - PAT down 20.8% to Rs480 million and EBITDA down 130bps to 9.7% - were below our estimates due to forex losses on MTM provisions for customer advances.
Revenue in Q4 grew by mere 10% due to higher share of bought-outs in the sales mix. Order backlog grew 23% in FY09 to Rs51.6 billion led by orders from South Asia (50% of backlog), which would minimize forex losses on customer advances going forward.
At our target P/E of 7x (60% discount to KEC’s average 3-year rolling forward P/E of 17x), KEC would trade at 42% discount to ABB (target multiple of 12x).
Reiterate BUY with a revised target price of Rs250, an upside of 18.5% from the current level.