MOSL: K E C INTL. (Upgrade to Buy)-Working capital pressure eases-execution to ramp up
K E C Intl.: Working capital pressure eases; execution to ramp up
(KECI IN, Mkt Cap USD1.1b, CMP INR294, TP INR347, 18% Upside, Upgrade to Buy)
- Lower execution leads to earnings miss: 4QFY19 revenues grew a tepid 5% YoY to INR38.4b (6% below expectation), while EBITDA margin expanded 30bp YoY to 10.4% (v/s expectation of 10.3%). Overall, PAT was flattish at INR2.0b (8% below expectation).
- Debt reduction — a pleasant surprise: A key positive from the 4QFY19 results was the sharp reduction in gross debt level to INR18.5b (from INR32.5b in 3QFY19), leading to net D/E improvement to 0.6x (FY18: 0.8x). Sharp debt reduction is attributed to (a) realization of INR4b of receivables from Saudi; (b) sale of BOT asset leading to net improvement of INR2.3b; and (c) strong advances from international orders in 4QFY19. While average debt for next year may be higher than current levels (as execution commences in international orders against received advances), KEC should operate in a much better macro environment compared to the liquidity tightening situation, six months ago.
KEC International is engaged in the design, manufacture, construction and erection of power transmission lines and related towers in India and other countries. In addition, Co. is engaged in the manufacture and sale and/or resale of petrochemicals including methyl ethyl ketone and isopropyl alcohol. Co. also provides investments and financial services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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