Friday, May 6, 2011

Results Flash - KEC - 4QFY2011 - Buy

Dear All,

 

Forwarding you the Result Flash on KEC International for 4QFY2011 with a Buy recommendation and a Target Price of `115 (12 months).

 

 

v  Revenues in line our estimates: KEC reported 15% yoy growth in its consolidated revenues to `1,559cr, which was marginally lower than our estimate of `1,570cr. For Full year, KEC posted 14.5% yoy growth to `4,477cr (`3,908cr). Notably, the revenues also included income from SAE towers which got consolidated during 3QFY11.

 

v  Steady EBIDTA margins: EBITDA margin for the quarter came in at 10.5%, which was slightly higher than our estimate of 10.3%.  On yoy basis, the margin improved by around 71bps.  This could be possibly due to the consolidation of SAE’s business which reported impressive margins in 3QFY11. EBIDTA for the quarter increased by 23.2% yoy to `164cr (`133crs) largely reflecting the margin improvement. We had estimated the EBIDTA at `161cr.

 

v  Reported PAT higher than our estimate:  Consolidated PAT for the quarter grew by 25% yoy to `79cr (`63cr), which was 8.9% higher from our estimate of `72cr. For Full year, KEC registered 8.4% yoy growth to `206cr (`190cr).

 

v  Overall, the results were broadly in line with our expectations. At CMP of `80, the stock is trading at 8.3x and 6.2x its FY2012E and FY2013E earnings estimate. We will revise our estimates post the earnings conference call. Currently, we maintain our BUY rating on the stock with a target price of `115.

 

 

Exhibit 1: Actual vs Estimates

( ` cr)

Actual

Estimates

Var (%)

Revenue

1,559

1,570

(0.7)

EBITDA

164

161

1.4

PAT

79

72

8.9

EPS

3.1

2.8

8.9

 

 

Exhibit 2: Quarterly performance (Consolidated)

(` cr)

4QFY11

4QFY10

% chg (yoy)

3QFY11

% chg (qoq)

FY2011

FY2010

% chg (yoy)

Net Sales

1,557

1,356

14.8

1,071

45.5

4,474

3,907

14.5

Other operating income

2

1

-

0.3

-

3

0.99

-

Total income

1,559

1,357

14.9

1,071

45.6

4,477

3,908

14.5

Stock adjustments

70

2

 

(20)

 

(55)

(9.3)

 

Raw Material

717

780

(8.1)

553

29.6

2,310

2,022

14.2

(% of total income)

46.0

57.5

 

51.6

 

51.6

51.7

 

Employee Cost

82

45

82.0

86

(4.9)

275

169

62.7

(% of total income)

5.3

3.3

 

8.1

 

6.1

4.3

 




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