Key takeaways of the call

Order book as end of Jun 30, 2019 was Rs 19016 crore and of which international orders accounts 51% and domestic 49%. Of the order book the share of T&D orders were 70% [SAE 10%; T&D KEC 60%] railways 25%, civil 2%, smart infra+solar 1% and cables 2%. In addition the company has an L1 order book of about Rs 3500 crore thus aggregating to an order book including L1 of Rs 22500 crore.

Order inflow so far in current fiscal was Rs 1115 crore of which domestic orders were 57% and international were 43%. Of the YTD order inflow T&D orders were 59%(SAE was 13% and balance are T&D KEC) cables 33% and 8% civil.

The company is confident of 15-20% growth in revenue for FY20. Expect the EBITDA margin to remain at current levels of 10.4% for full year as well. Strong traction in execution of high margin T&D business is to drive the revenue growth for FY20.

Second half is expected to see strong order inflow. The company maintains interest cost will be 2.7% of sales.

Revenue for Q1FY20 grew by 15%yoy to Rs 2412 crore led by 25.3% growth in overall T&D revenue to Rs 1599 crore and non T&D EPC revenue register a growth of 5% to Rs 621 crore. The cables revenue was up by 1.6% to Rs 263 crore. The overall T&D growth of 25% was led by 28.5% growth in KEC T&D business with revenue of SAE register a growth of 13%. SAE growth in Q1FY20 was backed by EPC execution of one project in Q1FY20. In non T&D EPC business growth was driven by strong 66.9% growth in railways to Rs 522 crore. The civil and others registered a fall of 45.2% and 78.2% in Q1FY20. EBITDA margin stood at 10.4% for Q1FY20 marginally up from 10.3% in corresponding previous period.

IND AS 116 impact: Depreciation & Interest impacted by approx. Rs 9 crore due to Lease accounting policy change and the net impact of the same at PBT was less than Rs 2 crore. Moreover interest for Q1FY20 include onetime prepayment premium of high cost loan. The impact of IND AS 116 on EBITDA was an increase of Rs 7 crore.

The company is L1 for a solar EPC project funded by a multilateral agency. It is a 30 MW project in Africa funded by World Bank. The value of the project is more than 100 crore.

Railways order inflow this year will be more on civil side, OHT, track laying. Have to wait for some more quarters for signaling orders from railway.

Civil order intake slowed down in Q1FY20. Now the company is focused on building, metro etc so as to achieve the desired scale up in civil business.

Despite being L1 for various orders the company still see award not happening/delayed. Not seeing too much of headwinds. Green energy corridor will get awarded in next couple of weeks.

Most tenders cancelled since March 2019. Railways little bit laggard in tendering and awarding in Q1FY2o. The company is L1 for railway orders worth Rs 1000 crore.

SAE margins were about 8.5-9%. By end of current fiscal the company expects the margin to cross double digit in SAE facilitated by increase in volume.

In Q1FY20 T&D Growth – both international and domestic T&D business of KEC reported growth in excess of 25%. International growth was higher than domestic. However strong international growth came on weak base of last fiscal.

The company expects orders across all verticals. In T&B both domestic and international. The company is L1 in quite few state orders. In international market Saudi Arabia start tendering and awarding frequently. However not much of orders in Abudabi as well as Dubai. Order pipeline for T&D in countries such as Bangladesh, Afghanistan, Nepal, African countries as well as Far East countries such as Malaysia is bright. Railways lot of tenders are coming in civil side especially ROBs, station modernization, track laying etc.

Saudi coming out with tenders frequently but local players is quoting lower. Brazil more orders to come in Q3& Q4.

PBT of Rs 2.1 crore of BikanerSikar BOT included in PBT in Q1FY19. Forex loss of Rs 6 crore against gain in corresponding previous period.

Hedging will be net of receivables. About 40% of the debt of the company is USD denominated.

Developers were identified for about 8 TBCB projects and of which six projects were already awarded to developers so far. The EPC work by developers is expected soon as 6 of the projects have to be completed by Dec 2020 and balances 2 are long gestation projects. In state sector tenders were cancelled but restart of it happening and moreover the l1 in state sector will also get awarded soon.

Green corridor projects worth about Rs 15-16000 crore and of which about Rs 13000 crore on TBCB.

Lower revenue for civil business in Q1FY20 was largely due to fall in execution of Industrial and real estate projects. Non availability of workers due to Election has also hit the revenue. The company is reasonably well placed for some civil orders.

The Essel Infra order is the slow moving order in the order book. The outstanding portion of that order was Rs 450 crore. Lenders are talking to some other developer to step to complete this project as it is of national importance.

All factories put together 30-40 crore is capex.