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    K E C Intl.

    KECGood
    Construction·29 Jul 2025
    Management Summary

    KEC International delivered a strong Q1 FY26 performance characterized by robust top-line growth and significant bottom-line expansion. The T&D business remains the primary engine, benefiting from a surge in domestic and Middle Eastern (specifically Saudi Arabia) demand. While the Civil segment faced headwinds from labor shortages and payment delays in water projects, management expects a recovery in H2, supported by a record order book and aggressive debt reduction targets.

    Highlights

    7

    • Revenue reached ₹5,023 crores, reflecting an 11% YoY increase, primarily driven by T&D execution.

    • EBITDA grew 19% YoY with margins expanding 50 bps to 7.0%.

    • PAT stood at ₹125 crores, a significant 42% YoY growth, outpacing EBITDA growth due to lower interest and depreciation.

    • Order book remains robust at ₹34,409 crores; including L1 positions, the total exceeds ₹40,000 crores.

    • T&D segment contribution to total revenue increased to 63% from 55% in the previous year.

    • Net debt (including acceptances) reduced by ₹250 crores YoY to ₹5,348 crores despite revenue growth.

    • Management guided for an 8% to 8.5% EBITDA margin for FY26 and closer to 10% for FY27.

    Concerns

    1

    • Payment Delays in Water Segment

    What Changed2

    vs Q3 FY26

    Tone shiftNeutral → GoodGuidance items4 → 5 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹5,023 Cr+11%YoY
    2. 02EBITDA Margin7%
    3. 03PAT₹125 Cr+42%YoY
    4. 04Net Debt₹5,348 Cr-4.5%YoY
    5. 05Order Book₹34,409 Cr

    Segment breakdown

    • T&D (Total)₹3,157 Cr63.8%
    • Civil₹940 Cr19.0%
    • Railways₹471 Cr9.5%
    • Cables₹383 Cr7.7%
    Donut· Share of Revenue

    Guidance & targets

    5
    CategoryTargetPriority
    Margin
    EBITDA Margin
    8% to 8.5%
    		High
    Margin
    EBITDA Margin
    10%
    		Medium
    Debt
    Net Debt Level
    ₹4,500 crores
    		High
    Other
    Net Working Capital Days
    110 days
    		High
    Revenue
    Renewables Revenue
    ₹3,000 - ₹4,000 crores
    		Medium

    Risks & concerns

    5
    RiskSeverity

    Labor Shortages

    Faced a 30-35% labor shortfall in June, which has improved to 10% but still impacts T&D erection gangs for large 765kV lines. — Management acknowledged

    medium

    Payment Delays in Water Segment

    Significant outstanding receivables (~₹800 crores) in the Jal Jeevan Mission projects are impacting working capital and civil segment growth. — Both acknowledged

    high

    Competitive Intensity in UAE

    Management noted some increase in intensity in UAE, though Saudi Arabia is seeing a reduction in bidders for large orders. — Management acknowledged

    low

    Areas of Evasion(2)

    • Specific EBITDA/PAT for Asian Cables (redirected to IR)
    • Exact quantification of revenue loss due to labor shortage (called it 'difficult to say')

    Q&A highlights

    3

    “One is our international business, which is housed in UAE and all that is doing very well. Secondly... our civil margins -- you saw a degrowth in the civil revenue. So because of which on the leverage impact, we had a much lower margins in civil.”

    Explains the disconnect between consolidated margin improvement and standalone margin pressure due to segment mix and fixed cost under-absorption.

    asked by Parikshit, HDFC Securities

    2 min read5 chapters

    Detailed Narrative

    01

    T&D Dominance and Middle East Tailwinds

    The T&D business grew by 26% YoY, now contributing 63% of total revenues. Management highlighted Saudi Arabia as a key growth driver, noting a reduction in competitive intensity for large-value orders. The segment maintains a healthy double-digit EBITDA margin and holds a massive ₹26,000 crore order book plus L1 position, providing strong visibility for the next two years.

    02

    Civil Segment Execution Hurdles

    Civil revenue of ₹940 crores was impacted by a 30-35% labor shortage in June and delayed payments in the water (Jal Jeevan) segment. Despite these headwinds, the segment secured ₹2,100 crores in new orders, including a landmark entry into the semiconductor EPC space and a premium 70-story residential project. Management expects civil margins to improve as they pivot toward larger ticket-size orders (>₹500 crores) and reduce the number of active sites.

    03

    Aggressive Deleveraging Strategy

    KEC is focused on reducing net debt from ₹5,348 crores to ₹4,500 crores by the end of FY26. This will be achieved through a reduction in Net Working Capital (NWC) from 128 days to 110 days. Key levers include the liquidation of cable inventory, collection of back-ended payments from three completed metro projects, and the anticipated recovery of ₹800 crores in water segment receivables.

    04

    Renewables and New Energy Pivot

    The Renewables business saw 87% growth, albeit on a small base, with revenues of ₹136 crores. Management is bullish on scaling this to ₹3,000-₹4,000 crores in the next 2-3 years. They are selectively bidding for solar, wind, and Battery Energy Storage Systems (BESS), while consciously avoiding module supply risks to protect margins.

    05

    Railway Segment Realignment

    The Railway business has seen a revenue decline over the last three years (from ₹4,000 crores to ₹2,500 crores) as the company shifts focus from conventional electrification to high-tech areas like Kavach and international signaling projects. Management expects a 'bottoming out' in this segment, with growth returning from Q2 FY26 onwards as new international bids in the Middle East materialize.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.