ICICI Securities has maintained its BUY rating on KEC International Ltd, citing sustained revenue momentum, rising profit margins, and a record order pipeline that enhances visibility for the next two years. The brokerage sets a 12-month target of Rs 910, implying a 22 percent upside from the current market price of Rs 760. Strong execution in transmission & distribution (T&D) lifted quarterly performance, while margin recovery and a 16 percent expected CAGR in revenues through FY27E point to steady earnings expansion. With PAT projected to surge 45 percent CAGR during FY25–FY27E, ICICI Securities believes KEC International is positioned for a structural re-rating.

Robust Q2FY26 Performance Highlights Operational Momentum

KEC International reported Q2FY26 revenue of Rs 6,091 crore, up 19 percent YoY, led by a 44 percent YoY surge in its T&D business, which now contributes 67 percent of total revenue (up from 55 percent a year earlier).

EBITDA rose 34 percent YoY to Rs 430 crore, with margins expanding 80 basis points to 7.1 percent.

PAT nearly doubled (+88 percent YoY) to Rs 160 crore, reflecting stronger execution efficiency.

The company reported order inflows of Rs 10,533 crore, with a backlog of Rs 39,325 crore and L1 positions worth an additional Rs 4,675 crore, ensuring over two years of execution visibility.

Revenue Growth Driven by Domestic T&D and Civil Segments

ICICI Securities projects a 16 percent CAGR in revenues during FY25–FY27E, fueled by the domestic T&D and civil divisions.

Domestic T&D and civil works are expected to grow 30–40 percent and 15 percent respectively in FY26E, supported by sectoral tailwinds and a bidding pipeline exceeding Rs 1.82 lakh crore.

Railways, intentionally scaled back due to high capital intensity, is expected to rebound in FY27E.

Management targets order inflows of Rs 30,000 crore in FY26E, with 70 percent of it from T&D, strengthening the company’s infrastructure franchise.

Margin Recovery Underway; EBITDA Expected to Reach 8.4 Percent by FY27E

ICICI Securities forecasts margin improvement from 6.9 percent in FY25 to 8.4 percent by FY27E, anchored by:

A higher share of the T&D segment, which commands double-digit margins.

Profit turnaround at SAE Tower Holdings, its Brazilian arm.

Completion of low-margin railway projects inherited from earlier years.

Management has guided for an 8 percent EBITDA margin for FY26E, while analysts model 7.9 percent for FY26E and 8.4 percent for FY27E — signaling sustainable improvement in operating efficiency.

Large and Diversified Order Book Strengthens Visibility

The company’s Rs 1.8 trillion order pipeline covers T&D, civil, urban infrastructure, oil & gas pipelines, and smart-infra projects.

About 35 percent of the backlog is international, providing geographical diversification.

Recent marquee wins include Rs 3,100 crore and Rs 1,000 crore HVDC contracts in the UAE and Saudi Arabia, respectively, enhancing global credentials.

The civil division—hit by manpower shortages and monsoon delays—is expected to rebound, targeting Rs 5,000 crore in FY26E revenues, up 10–15 percent year-on-year.

Financial Outlook: Profits Poised for 45 Percent CAGR Through FY27E

The brokerage expects strong earnings momentum ahead, driven by operational leverage and a rising margin trajectory.

ICICI Securities anticipates PAT CAGR of 45 percent over FY25–FY27E, driven by 16 percent sales growth and normalized working-capital cycles.

Leverage and Cash Flow Dynamics

As of September 2025, net debt (including acceptances) stood at Rs 6,480 crore, up from Rs 5,265 crore a year earlier due to inventory buildup and delayed water-project payments.
Management expects this to normalize to ~Rs 5,000 crore by FY26 end, aided by better collections and steady execution. Working-capital days have increased to 138 (from 130 YoY), but the company targets ~118 days by FY26E.

Valuation: Attractive Risk-Reward With Strong Re-Rating Potential

At Rs 760, KEC International trades at 16.4× FY27E EPS, a discount to sector peers. ICICI Securities assigns a target price of Rs 910 (20× FY27E EPS), translating into a 22 percent upside.
Key value drivers include expanding margins, a resilient international order book, and rising returns on capital — RoCE is projected to increase from 15.3 percent in FY25 to 21.2 percent by FY27E.

Key Risks to Monitor

Execution Delays: Slow project rollouts or settlement lags could strain working capital.

Rising Input Costs: Steel and commodity inflation may squeeze margins if not passed through.

Interest-Cost Pressures: Any uptick in borrowing rates could moderate near-term profitability.

Investment View: BUY for Structural Upside

ICICI Securities underscores KEC International’s commanding presence across power T&D, railways, civil, and urban infrastructure — sectors aligned with India’s multi-year capex cycle. With strong order inflows, disciplined execution, and recovering profitability, the company’s growth story appears far from over. The research house reiterates its BUY rating, assigning a 12-month target of Rs 910, viewing the stock as a compelling play on India’s infrastructure resurgence.