BackKEC eyes number 2 spot in infra space, but analysts wary of near-term hiccups
The company key focus area remains ESG but it is also planning to strengthen margin and return profile by faster turnaround and achieving economies of scale in new businesses
PremiumInfrastructure major KEC International Ltd aims to be the number two player in the infrastructure space over the next five years, the company's management said at its annual analyst meet. The company key focus area remains ESG but it is also planning to strengthen margin and return profile by faster turnaround and achieving economies of scale in new businesses.
Given KEC's strong track record in adding and integrating new scalable businesses profitably, analysts say the company may be well placed to achieve the set targets. The management is confident of keeping working capital/sales at around 23% over FY21-24. However, analysts see some near-term challenges to the company's plan.
For KEC, the commodity cost inflation risk is higher than ongoing covid-19 disruptions, said analysts at Motilal Oswal Financial Services Ltd. "KEC has levers to hedge rising aluminium and copper prices, but not for steel. The risk to margin may be minimal beyond 1QFY22 as prices have started cooling off late and recent bids have higher prices factored in," added the Motilal Oswal report.
Apart from risks to margins, analysts at Nirmal Bang Securities Ltd point out that delay in tender awards, localized lockdown affecting execution and cash-flow disruption with certain clients due to Covid-19, remain key drag on the overall performance going forward.
Meanwhile, in FY22, the management is targeting Rs8,000-9,000 crore from the T&D segment versus ₹7500 crore in FY21. While the pipeline is strong in the overseas T&D market, domestic T&D continues to see sluggishness. The management stated that the outlook for domestic T&D business is weak and there is uncertainty about large projects. Overall, the management expects domestic T&D business to be flattish going forward.
Among all its segments, its civil business grew three times in FY21 and it will be a major growth driver going forward, analysts said. The company aims to be among the top three players in this business by FY25.
KEC International stock rose around 1.5% on the NSE in Thursday's opening trade.
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