KEC - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 3.4

📊 Core Financials

• Quarterly PAT surged from ₹36.8 Cr. to ₹106 Cr. (+81.8% growth), showing strong recovery.
• ROCE at 14.6% is decent, but ROE at 7.0% is weak compared to peers.
• Debt-to-equity ratio at 0.90 indicates high leverage, which adds financial risk.
• Cash flows supported by revenue growth, but debt levels remain a concern.

💹 Valuation Indicators

• P/E Ratio: 50.5 (well above industry PE of 18.8, suggesting overvaluation).
• P/B Ratio: ~3.7 (CMP ₹712 / Book Value ₹194).
• PEG Ratio: -3.26 (negative, highlighting weak valuation relative to growth).
• Intrinsic Value: Lower than CMP, limited margin of safety.

🏢 Business Model & Competitive Advantage

• KEC International operates in EPC (Engineering, Procurement & Construction) with focus on power transmission, railways, and civil projects.
• Competitive advantage lies in diversified project portfolio and global presence.
• Execution strength and government infrastructure push support long-term demand.

📈 Entry Zone & Long-Term Guidance

• Entry Zone: Attractive near ₹620–₹660 (close to 52-week low ₹605).
• Long-Term Holding: Suitable for investors seeking infrastructure exposure, but high debt and stretched valuations warrant caution.

✅ Positive

• Quarterly PAT growth of +81.8% shows strong earnings recovery.
• Decent ROCE at 14.6% indicates operational efficiency.
• Diversified business model across power, railways, and civil projects.

⚠️ Limitation

• High P/E ratio (50.5) compared to industry average (18.8).
• ROE at 7.0% is weak, limiting shareholder returns.
• Debt-to-equity ratio at 0.90 adds financial risk.

📉 Company Negative News

• Institutional investors reduced holdings (FII -0.10%, DII -0.01%).
• Stock trading below DMA 50 & DMA 200, reflecting weak technical momentum.

📈 Company Positive News

• Quarterly PAT rose sharply to ₹106 Cr. from ₹36.8 Cr.
• Strong order inflows in infrastructure projects support revenue visibility.

🏭 Industry

• Infrastructure and EPC sector benefits from government spending and global demand.
• Industry PE at 18.8, showing sector valuations are moderate compared to KEC’s premium.

🔎 Conclusion

KEC International shows strong earnings recovery and diversified business exposure, but valuations are stretched with high P/E and weak ROE. Debt levels remain elevated, adding risk. Entry is advisable near ₹620–₹660 for better risk-reward. Long-term investors may benefit from infrastructure growth, though cautious accumulation is recommended due to leverage and valuation concerns.