CMP: 72

KEC is headquartered in Mumbai as part of the RPG Group, is very much regarded as a global entity. “Indeed, it is one of the top three companies in the world when it comes to building and constructing power transmission lines and towers and No. 2 in the manufacture of electricity transmission towers in India; Its focus is the engineering, procurement and construction of transmissions and power line construction, the construction of railway lines, telecoms towers, cables and water management".

Global Presence:
KEC is continuously expanding its footprint in the global markets, while, it already has strong presence in South Asia, Middle East, Africa, Central Asia and North America & Latin America. KEC has undertaken various projects across 45 countries globally and it derives more than half of its revenues from outside India.KEC International had completed the acquisition process of US-based SAE Tower, along with its subsidiary firms in Brazil, Mexico and America in 2QFY2011. SAE Tower is a leading manufacturer of lattice transmission towers in the Americas with annual production capacity of 100,000MT spread over 2 locations i.e. Monterrey, Mexico (35,000 MT) serving the North American market and Belo Horizonte, Brazil (65,000 MT) serving the Latin American market.
Outlook and Valuation:
Net Sales in FY2011 grew by 14.5% to Rs4,474cr from Rs3,907cr in FY2010. Going forward, we expect a 18.9% CAGR in Net Sales over FY2011-13E to Rs6,323cr. Based on the current order book worth ~Rs8,116cr (The order book of the company comprises of various segments i.e. Transmission (~72.5%), Power Systems (~19.6%), Railways (~4.7%), Cables (~1.8%) and the balance in Telecom and Water (~1.1%)), we believe that the expected growth is achievable. We expect the company to maintain EBITDA margins in the range of ~9.7%-10.2%, going forward. KEC has recently acquired SAE Towers, which has a relatively higher operating profit margin (~14%) compared to its global peers. We expect that the profitability of KEC would boost post the acquisition of SAE Tower. We expect the company to achieve Net Profit CAGR of 18.2% during FY2011-13E. It has a market cap of 1856 Crores and the stock is trading at a P/E of 12.6x. The company's fundamentals look good.