Infrastructure major KEC International is facing increased scrutiny following its Q1FY27 results, prompting brokerage Geojit to downgrade the stock to a 'Sell' rating. The company's shares recently touched a 52-week low of Rs 399.95 on September 3rd, closing at Rs 410 in the current session, as market sentiment reflects concerns over its financial performance.
Q1FY27 Results Highlight Challenges
KEC International reported flat revenue of Rs 5,023 crore for the first quarter of fiscal year 2027. This stagnation was attributed primarily to significant supply chain disruptions, particularly those linked to the Middle East crisis, and persistent labor shortages that impacted project execution.
Profitability also saw a notable decline, with the EBITDA margin falling by 118 basis points year-on-year to 5.8%. This contraction was a direct result of higher input costs and slower-than-anticipated execution in key railway and civil projects. Geojit anticipates that this margin pressure will continue in the near term, further weighing on the company's overall profitability.
Uneven Execution and Earnings Cuts
Execution across KEC International's various segments has been inconsistent. While the civil and cable divisions showed steady performance, supported by improved demand, other critical segments like Transmission & Distribution (T&D), railway, and solar projects experienced weakness.
Despite these operational hurdles, the company's order book remains robust, growing 10% year-on-year to Rs 37,697 crore in Q1FY27, driven by a 14% increase in new order inflows. KEC International has set an ambitious target of Rs 30,000 crore in order inflows for FY27, with 60-70% expected from its T&D business.
However, Geojit has significantly revised its earnings forecasts for KEC International, cutting FY27 projections by 36% and FY28 projections by 25%. This substantial revision reflects concerns over prolonged execution delays, elevated project costs, persistent cost inflation, and ongoing disruptions in the Middle East. The brokerage has set a target price of Rs 368 for the stock, based on an 11x price-to-earnings multiple on FY28 EPS.
Geojit noted, "Execution remained uneven across segments, margins weakened and profitability continued to face pressure." The firm emphasized that while the order book is strong, earnings visibility and return ratios are likely to remain subdued in the immediate future.
Investors are advised to consult with a qualified financial advisor before making any investment decisions, as this report is for informational purposes only.