This Construction Company Has A Buy Rating, With A Potential Of 12% Upside

The construction markets globally declined to $10.7 trillion in 2020 but recovered sharply since 2021, estimated to grow 11.5 billion this year. Hence, the brokerage firm CD Equisearch has recommended buying stocks of KEC International with a potential upside of 12%, within a target period of 1 year.

Target Price

The Current Market Price (CMP) of KEC International is Rs. 459. The brokerage firm, HDFC Securities Recommends has estimated a Target Price for the stock at Rs. 514. Hence the stock is expected to give a 12% return, in a Target Period of 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 459
arget Price	Rs. 514
1 Year returns	12.00%

Company performance

Bolstered by a healthy execution in non T&D nearly 46% of the overall top-line, KEC International clocked in revenue from operations of Rs. 3587.46 crore in Q2FY22, a growth of over 10% year-over-year and a massive 41.2% quarter-on-quarter. Operating profits in Q2FY21 declined by 13.7% year-over-year to Rs. 252.96 crore, while operating margins got eroded by 190 bps to 7.1%. Even Q1FY22 OPMs exhibited a y-o-y decline of over 250bps to stand at a several-year low of 6.3%. The company's EBITDA (other income included) stood at Rs. 1268.92 crore.

Comments by CD Equisearch

According to CD Equisearch, "The primary drivers of this growth were the civil, railways and cable segment, which witnessed a growth of 112%, 20%, and 43% respectively, compared to the corresponding period in the prior year." However, the firm added, "Despite the robust top-line growth, the company's margins have taken a substantial hit. Steep rise in cost structure due to elevated commodity prices and continued cost over operations) have impacted margins more than what estimated earlier."

About the company

KEC International is a US$1.8 billion Engineering, Procurement, and Construction (EPC) major, and they deliver projects in key infrastructure sectors such as Power Transmission & Distribution, Railways, Civil, Urban Infrastructure, Solar, Smart Infrastructure, Oil & Gas Pipelines, and Cable. They have a manufacturing footprint across India, Dubai, Brazil, and Mexico, and their supply chain extends in over 105 countries.

Disclaimer

The above stock was picked from the brokerage report of CD Equisearch. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

(Also read: HDFC Securities Recommends To Buy This Stock For 14.37% Return, In 6 Months)