KEC's Q4FY15 net profit up 83.09% y/y to INR628.9m; Firstcall recommend 'buy'

1. CMP 110.45
Target Price 127.00
ISIN: INE389H01022
June 6th
2015
KEC INTERNATIONAL LTD
Result Update (CONSOLIDATED): Q4 FY15
BUYBUYBUYBUY
Index Details
Stock Data
Sector Heavy Electrical Equipment
BSE Code 532714
Face Value 2.00
52wk. High / Low (Rs.) 153.00/71.95
Volume (2wk. Avg. Q.) 275000
Market Cap (Rs. in mn.) 28396.70
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 84678.00 90097.39 97305.18
EBITDA 6580.30 7459.01 8347.65
Net Profit 1609.90 1964.16 2355.67
EPS 6.26 7.64 9.16
P/E 17.64 14.46 12.05
Shareholding Pattern (%)
1 Year Comparative Graph
KEC INTERNATIONAL LTD BSE SENSEX
SYNOPSIS
KEC International Ltd (KEC or the Company) is an
infrastructure EPC major with presence in Power
Transmission & Distribution (T&D), Cables,
Railways and Water.
In Q4 FY15, Net profit jumps to Rs. 628.90 million
an increase of 83.09% against Rs. 343.50 million in
Q4 FY14.
The company’s net sales of Rs. 25210.90 million in
Q4 FY15 when compared to Rs. 21758.70 million in
the corresponding quarter of previous year.
During the quarter operating profit is Rs. 1933.40
million as against Rs. 1546.00 million in the
corresponding period of the previous year, an
increase of 25.06%.
Profit before tax (PBT) at Rs. 1000.00 million in Q4
FY15 compared to Rs. 697.00 million in Q4 FY14,
registered a growth of 43.47%.
KEC International Ltd has recommended a Dividend
of Rs. 0.90/- per equity share of Rs. 2.00/- each for
the year ended March 31, 2015.
Net profit grew by 141% to Rs. 1609.90 million for
the end of FY15 from Rs. 667.50 million for the end
of FY14.
For the end of FY15, the company registered a
growth of 7% in Net sales to Rs. 84678.00 million
from Rs. 79018.30 million for FY14.
Net Sales and PAT of the company are expected to
grow at a CAGR of 9% and 38% over 2014 to 2017E
respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Kec International Ltd 110.45 28396.70 6.26 17.64 2.14 45.00
Ujaas Energy Limited 15.00 3000.00 0.59 25.42 1.72 20.00
Triveni Turbine Ltd 105.20 34713.10 2.76 38.12 12.75 75.00
Crompton Greaves Ltd 163.30 102347.60 3.34 48.89 2.68 60.00

2. QUARTERLY HIGHLIGHTS (CONSOLIDATED)
Results updates- Q4 FY15,
The company has achieved a turnover of Rs. 25210.90 million for the 4th quarter of the financial year 2014-15 as
against Rs. 21758.70 million in the corresponding quarter of the previous year. EBITDA of Rs. 1933.40 million in
Q4 FY15, an increase of 25.06% against the corresponding period of last year. In Q4 FY15, net profit of Rs. 628.90
million against Rs. 343.50 million in the corresponding quarter of the previous year. The company has reported
an EPS of Rs. 2.45 for the 4th quarter as against an EPS of Rs. 1.34 in the corresponding quarter of the previous
year.
Break up of Expenditure
Rs. In million Mar-15 Mar-14 % Change
Net Sales 25210.90 21758.70 15.87
PAT 628.90 343.50 83.09
EPS 2.45 1.34 83.09
EBITDA 1933.40 1546.00 25.06
Break up of Expenditure
(Rs in millions)
Q4 FY15 Q4 FY14
%
CHNG
Cost of materials
consumed
12428.20 11359.10 9%
Erection &
subcontracting expenses
5985.90 4728.50 27%
Employee benefits
expense
1439.70 1433.80 0%
Depreciation &
amortisation expense
223.00 176.00 27%
Other expenses 2754.60 2402.00 15%

3. COMPANY PROFILE
KEC International Limited, the flagship company of RPG Group is global infrastructure Engineering, Procurement
and Construction (EPC) major. It has presence in the verticals of Power Transmission & Distribution, Cables,
Railways, Water & Renewables. The Company has powered infrastructure development in 52 countries across
Africa, Americas, Central Asia, Middle East, South Asia and South East Asia.
Business units
Power Transmission
KEC has a global leadership position in the Power Transmission EPC space. This is the largest business vertical of
the Company. With more than 7 decades of experience, it has capabilities to design, manufacture, test, supply and
erect transmission lines on turnkey basis up to 1,200 kV.
Power Distribution
The Company undertakes EPC projects of High Voltage Electrical Switching and Distribution Substations,
Distribution network, installation of optical fiber networks, telecom towers and HV/EHV Cabling project works
worldwide. The company is having strong in-house design & engineering capabilities for electrical as well as
structural and civil works, global supply chain management team and highly experienced project management
team to deliver these projects as per customer’s specific requirements.
Cables
KEC is one of the leading manufacturers of power cables and telecom cables in India. It has three state-of-the-art
manufacturing facilities located in Vadodara (Gujarat), Mysore (Karnataka) and Silvassa (Union Territory). The
manufacturing facilities are accredited with ISO 9001 (All 3 facilities), ISO 14001 (Mysore and Silvassa) and
OHSAS 18001 (Mysore) certifications.
KEC entered the cables business by acquiring RPG Cables in 2010. RPG Cables with a rich experience of over 5
decades, is one of the oldest and largest fully integrated cable manufacturers in India. It pioneered the
production of XLPE cables in India. It has a diverse clientele across industries including power, oil & gas, steel,
engineering, electricity supply etc. The company is also amongst the leading Indian exporters of cables. It has a
strong pan-India marketing and distribution network comprising dealers and sales offices. The company is well
equipped with testing facilities as per various national and international specifications.
Telecom
KEC is amongst the leading EPC players providing telecom towers and telecom cable installation services on
turnkey basis. The Company provides end to end solutions in design, manufacturing and erection of telecom

4. towers to operators, tower management companies and utilities. The Company also provides installation &
commissioning of Microwave, BTS, GSM and CDMA equipments. The Company has rich experience in laying
Optical Fiber Cable (OFC) and Optical Power Ground Wire (OPGW) cables on turnkey basis.
Railways
KEC is a complete turnkey solutions provider in the Railways Infrastructure EPC space. It is one of the early
entrants in the Railway electrification space, having electrified more than 6,000 kms of Indian Railways. In 2009,
the Company started a new vertical to make further in-roads into the Railway business. The Company since then
has developed capabilities and diversified in all functional segments of railway construction such as Civil & Track
works, Electrification and Signaling. The Company also undertakes Railway Infrastructure jobs for private
customers and has developed competencies and capabilities to undertake Railway projects including composite
jobs in any challenging terrain or environment.
Water
KEC entered in Water Business in early 2011 to leverage its expertise in project management and EPC
infrastructure space. The Company is focusing on projects both in Water Resource Management and Water and
Waste Water Treatment. The Company undertakes projects pertaining to construction of canals, dams, tunnels,
embankments, flood control and lift irrigation schemes. The Company, having successfully executed construction
projects across rivers such as Ganga, Brahmaputra, Kosi and the Nile, understands the dynamics of water
resources very well and is equipped to take up any challenging task in the management of water resources.
The Company undertakes complete integrated water management projects which would comprise of intake
system, transmission, storage, treatment and distribution of water supply schemes. In addition to this, the
Company also proposes to be present in water reuse and sea water desalination projects. The Company has
capability to bring in world class technologies in water & waste water services as per customer requirements.
SAE Towers Holding LLC, United States
KEC acquired 100% stake in SAE Towers Holdings LLC (SAE Towers) in September 2010 at an enterprise value
of USD 95 million. Currently, SAE Towers is a 100% wholly owned subsidiary of KEC. SAE Towers -
Headquartered in Houston, Texas, United States, SAE Towers is the leading manufacturer of lattice transmission
towers in the Americas. It has a manufacturing capacity of 100,000 MTs per annum spread over 2 locations –
Brazil and Mexico. It is the largest lattice towers manufacturer in the Americas.
The Company has in-house design & engineering team, in-house tower manufacturing & tower testing and
excellent track record of transmission line construction, project execution and project management.

5. FINANCIAL HIGHLIGHT (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2014 -2017E
FY14A FY15A FY16E FY17E
I. EQUITY AND LIABILITIES:
A. Shareholders’ Funds
a) Share Capital 514.20 514.20 514.20 514.20
b) Reserves and Surplus 11401.65 12783.80 14381.78 16021.30
Sub-Total-Net worth 11915.85 13298.00 14895.98 16535.50
B. Non-Current Liabilities:
a) Long-term borrowings 6026.00 7370.40 8475.96 9154.04
b) Deferred Tax Liabilities [Net] 730.83 703.60 682.49 696.14
c) Other Long Term Liabilities 100.00 100.00 100.00 100.00
d) Long Term Provisions 100.74 111.30 117.98 122.70
Sub-Total-Long term liabilities 6957.57 8285.30 9376.43 10072.88
C. Current Liabilities:
a) Short-term borrowings 12068.67 13080.90 14388.99 15396.22
b) Trade Payables 32130.62 33248.30 34578.23 35269.80
c) Other Current Liabilities 9890.36 8428.50 7585.65 6978.80
d) Short Term Provisions 1150.64 1107.20 1073.98 1052.50
Sub-Total-Current Liabilities 55240.29 55864.90 57626.86 58697.32
TOTAL-EQUITY AND LIABILITIES (A+B+C) 74113.71 77448.20 81899.26 85305.69
II. ASSETS:
D. Non-Current Assets:
a) Fixed Assets 9922.10 8810.70 8370.17 8453.87
b) Goodwill on consolidation 3777.70 3942.70 4139.84 4264.03
c) Non-current investments 0.00 0.10 0.11 0.12
d) Deferred tax assets 217.14 176.30 185.12 188.82
e) Long Term Loans and Advances 1976.59 3120.70 4202.56 5127.88
f) Other non-current assets 1312.29 1928.70 2488.02 2960.75
Sub-Total-Non-Current Assets 17205.82 17979.20 19385.80 20995.46
E. Current Assets:
a) Inventories 5052.31 4763.90 4954.46 5053.55
b) Trade Receivables 38077.98 38529.30 39454.00 39690.73
c) Cash and Bank Balances 1440.07 2063.20 2661.53 3140.60
d) Short Term Loans and Advances 5129.81 6386.40 7408.22 8149.05
e) Other Current Assets 7207.72 7726.20 8035.25 8276.31
Sub-Total-Current Assets 56907.89 59469.00 62513.46 64310.23
TOTAL-ASSETS (D+E) 74113.71 77448.20 81899.26 85305.69

6. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 79018.30 84678.00 90097.39 97305.18
Other Income 137.90 1462.30 1602.68 1730.90
Total Income 79156.20 86140.30 91700.07 99036.08
Expenditure -74085.70 -79560.00 -84241.06 -90688.43
Operating Profit 5070.50 6580.30 7459.01 8347.65
Interest -2632.70 -3088.60 -3335.69 -3535.83
Gross profit 2437.80 3491.70 4123.32 4811.82
Depreciation -705.20 -881.10 -965.69 -1042.94
Exceptional Items -181.60 0.00 0.00 0.00
Profit Before Tax 1551.00 2610.60 3157.64 3768.88
Tax -883.40 -1000.80 -1193.59 -1413.33
Profit After Tax 667.60 1609.80 1964.05 2355.55
Share of Profit & Loss of Asso -0.10 0.10 0.11 0.12
Net Profit 667.50 1609.90 1964.16 2355.67
Equity capital 514.20 514.20 514.20 514.20
Reserves 11401.70 12783.80 14381.78 16021.30
Face value 2.00 2.00 2.00 2.00
EPS 2.60 6.26 7.64 9.16
Quarterly Profit & Loss Statement for the period of 30th Sep, 2014 to 30th Jun, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net sales 21726.80 20532.90 25210.90 21303.21
Other income 10.90 1349.80 86.70 44.82
Total Income 21737.70 21882.70 25297.60 21348.03
Expenditure -20518.60 -19487.20 -23364.20 -19854.59
Operating profit 1219.10 2395.50 1933.40 1493.44
Interest -909.50 -809.10 -710.40 -717.50
Gross profit 309.60 1586.40 1223.00 775.94
Depreciation -222.30 -226.10 -223.00 -245.30
Profit Before Tax 87.30 1360.30 1000.00 530.64
Tax 115.50 -695.80 -371.10 -188.38
Profit After Tax 202.80 664.50 628.90 342.26
Share of Profit & Loss of Asso 0.20 -0.20 0.00 0.00
Net Profit 203.00 664.30 628.90 342.26
Equity capital 514.20 514.20 514.20 514.20
Face value 2.00 2.00 2.00 2.00
EPS 0.79 2.58 2.45 1.33

7. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 2.60 6.26 7.64 9.16
EBITDA Margin (%) 6.42 7.77 8.28 8.58
PBT Margin (%) 1.96 3.08 3.50 3.87
PAT Margin (%) 0.84 1.90 2.18 2.42
P/E Ratio (x) 42.54 17.64 14.46 12.05
ROE (%) 5.60 12.11 13.19 14.25
ROCE (%) 19.25 22.11 22.31 22.86
Debt Equity Ratio 1.52 1.54 1.53 1.48
EV/EBITDA (x) 8.88 7.11 6.52 5.97
Book Value (Rs.) 46.35 51.72 57.94 64.32
P/BV 2.38 2.14 1.91 1.72
Charts

8. OUTLOOK AND CONCLUSION
At the current market price of Rs. 110.45, the stock P/E ratio is at 14.46 x FY16E and 12.05 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.7.64 and Rs.9.16
respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 38% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 6.52 x for FY16E and 5.97 x for FY17E.
Price to Book Value of the stock is expected to be at 1.91 x and 1.72 x respectively for FY16E and FY17E.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its
growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.127.00 for Medium to Long term investment.
INDUSTRY OVERVIEW
Power
Power or electricity is one of the most critical components of infrastructure affecting economic growth and well-
being of nations. The existence and development of adequate infrastructure is essential for sustained growth of
the Indian economy. The Indian power sector is undergoing a significant change that is redefining the industry
outlook. Sustained economic growth continues to drive power demand in India. The Government of India’s focus
to attain ‘Power For All’ has accelerated capacity addition in the country. At the same time, the competitive
intensity is increasing on both market side as well as supply side (fuel, logistics, finances and manpower).
The Planning Commission’s 12th Plan expects total domestic energy production to reach 669.6 million tonnes of
oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22. By 2030 – 35, energy demand in India is
projected to be the highest among all countries according to the 2014 energy outlook report by British oil giant
BP. The Indian power sector has an investment potential of Rs 15 trillion (US$ 237.35 billion) in the next 4-5
years, providing immense opportunities in power generation, distribution, transmission and equipment, said Mr
Piyush Goyal, Union Minister of Coal, Power and Renewable Energy.
Cables
The Current size of cables market in India is estimated to be Rs. 14000 crores ($ 2.6 bn) per annum. The demand
for power cables is mainly driven by the power sector, real estate and industries such as steel, oil & gas,
chemicals etc. The Government of India’s aggressive growth plans in the power sector, especially in the

9. distribution segment, during the 12th plan, provides significant growth opportunities in power cables. Extra High
Voltage (EHV) cables is expected to be the fastest growing product segment, as the urban regions of India are
increasingly moving away from over-head lines to under-ground cabling. The demand for Optical Fibre Cables is
driven by growth in the telecom sector.
In India, the PGCIL plans to invest Rs. 4000 cr. ($740mn) under National Optic Fibre Network(NOFN) for
establishing OFC networks on high voltage overhead lines. Domestic tower market continues to be dull as
operators are not expanding networks despite subscriber growth and poor quality of network. This is expected
to change as demand for improved quality increases.
Railways
The Indian Railways is among the world’s largest railway networks and has strongly emerged as the main vehicle
for the country’s socio economic development. It caters to the transportation needs of the country, while also
bringing together the diverse geographies and assisting in promoting national integration. Furthermore, the
railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an
energy efficient and economic mode of conveyance and transport. The 64,600-km network is spread across 7,146
stations, with 19,000 trains operating the routes daily.
The already massive network of the Indian Railways is growing at a healthy rate, given the rise in population and
a growing economy that offers immense growth potential. In the next five years, the Indian railway market will
be the 3rd largest, accounting for 10 per cent of the global market, with Metro rail going to be 70 per cent of the
railway market in India.
Water
India has 16% of the world’s population; but only has 4% of world’s total available fresh water. While the
availability of fresh water is almost fixed, the demand for water is expected to expand from 710Billion Cubic
Meter (BCM) in 2010 to 1,093 BCM in 2025. Only 30% sewage is treated before disposal which is increasingly
causing pollution
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in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
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