KEC INTERNATIONAL LTD. - The Smart Investor

Initiating CoverageKEC International Ltd.Total capex of PGCIL for 12 tharound Rs. 1, 20, 000 crsplan isRobust order book gives revenue visibilityKEC International has order book of Rs. 7800 crs, which is 1.75x of FY11 revenue. Inspite of the slowdown in inflow in domestic order (delay by PGCIL), KEC bagged largeamount of orders from international market. During Q4FY11, company registeredorder inflow of Rs. 1390 crs, an increase of 75% YoY. KEC has posted 26% CAGR in itsorder book over 2007‐11. KEC’s order book is dominated mainly by Transmissionsegment, which account s for 73% of total order book and on geographical basis, SouthAsia accounts for 47%.12,00010,0008,0006,0004,0002,000‐Order book & Order backlog ( Rs. in Crs)3,0862,6214,3185,1634,046 4,2725,7074,4517,833 9,5256,6007,26010,9617,986FY07 FY08 FY09 FY10 FY11E FY12E FY13EOrder Backlog(Sources:‐ Company data, Nirmal Bang Research)Order InflowWe expect the company to report robust order inflow in FY12 being the last year of11th plan. We expect healthy Order inflow to continue over the next 2‐3 years onaccount of increased domestic orders from majors companies like PGCIL and otherstate utilities.PGCIL orders to drive growth in Domestic market………Going ahead in 12th five year plan (FY13‐FY17), a significant portion of T&D investmentis expected to be incurred by PGCIL to strengthen the national grid. The government ofIndia is targeting to spend at least Rs. 2.4 trillion on transmission alone during the 12thplan of which PGCIL is expected to incur 50% of total capex.PGCIL capex ( Rs. Crs)120,0008,100 10,600 12,900 15,700FY09 FY10 FY11E FY12E FY13E‐ FY17E(Sources:‐ Power Grid, Nirmal Bang Research)Thus owing to superior execution skills and excellent track record KEC is well poisedto bag more orders from PGCIL going ahead.