KEC International (KECI IN) – Q2FY26 Result Update – Strong Q2; non-T&D margin revival in focus – BUY

KEC International (KEC) reported a 19.1% YoY revenue growth with EBITDA margin expanding 80bps YoY to 7.1%. The T&D business continues to exhibit strong momentum, supported by a healthy pipeline of ~Rs200–250bn in India and ~Rs400–450bn across international markets such as the Middle East, Africa, and CIS. Execution in the Civil segment was impacted by extended monsoons, labor shortages, and delayed collections in the Water business. Despite these challenges, management expects 10-15% growth in Civil business in FY26. The Cables segment is witnessing steady improvement in profitability, with capacity expansions on track to become operational by Q1FY27. Working capital is expected to improve from 138 days, supported by cash inflows in Q4FY26, aiding debt normalization to ~Rs50bn by end-FY26. Management reiterated its guidance of ~15% revenue growth and ~8% EBITDA margin for FY26. We remain positive on KEC for the long term given its 1) strong order book, 2) healthy execution momentum, 3) robust T&D outlook, especially in renewable energy, and 4) expansion of Cables business. The stock is currently trading at a P/E of 15.2x/12.8x on FY27/28E earnings. We roll forward to Sep’27E and upgrade our rating from ‘Accumulate’ to ‘Buy’ given the likely margin revival in non-T&D business and recent correction in the stock price. We value the business at a PE of 17x Sep’27E (18x Mar’27E earlier) arriving at a TP of Rs932 (Rs911 earlier). Upgrade to ‘Buy’.