KEC International (KECI IN) – Q1FY27 Result Update – Dismal Q1; execution hold key amid ME disruption – ACCUMULATE

We revised our EPS estimates by -1.8%/-6.3% for FY27E/28E factoring in sustained margin pressure and slower-than-expected working-capital normalisation amid Middle East-related disruptions and legacy project headwinds. KEC International (KECI) reported a weak Q1FY27 performance, with revenue broadly flat YoY and EBITDA margin declining 118bps YoY, impacted by Middle East disruptions, labour shortages and calibrated water execution. Despite a strong ~Rs377bn order book, near-term execution remains challenging amid elevated logistics and freight costs. T&D remained resilient, supported by a healthy pipeline, HVDC and data-centre opportunities, while Cables delivered robust 57% YoY revenue growth, with specialty cables providing scope for further mix and margin improvement. Renewables also witnessed healthy order traction, supporting business diversification. However, Civil, Transportation and Water remain near-term drags due to legacy project closures and elevated receivables. Management retained FY27 revenue growth guidance of 12–15%, with recovery skewed towards H2 as West Asia conditions normalise. Working capital remains a key monitorable, with a ~110-day target by FY27-end, while net debt of ~Rs65.7bn is targeted to decline to ~Rs55bn by Mar’27. Overall, strong order visibility provides medium-term support, but weak margins, elevated working capital and execution/geopolitical headwinds are likely to keep earnings recovery gradual. The stock is currently trading at a P/E of 16.7x/12.1x on FY27/28E earnings. We maintain our ‘Accumulate’ valuing the business at a PE of 14x Mar’28E (same as earlier) arriving at a TP of Rs523 (Rs558earlier).