KEC International Q3FY17 Concall Summary

Key Financial Updates

• Gross revenues for the third quarter were down 6.5% y-o-y. YTD gross revenues fell by 3.6% y-o-y
• Revenues in Q3 FY 17 were impacted due to following reasons
  • Impact of demonetization on ancillary support industries (revenues loss ~ 3% to 4% of Q3 FY 17 total sales)
  • Conversion delay in a large chunk of L1 orders
  • Delay in revenues from the substation project in Jammu Kashmir due to land availability
• KEC continues to progress on the margin front – EBITDA margin of 9.26% in Q3 FY17 as against 8% in Q3 FY 16, an improvement of 126bps y-o-y
• FOREX impact was around INR 10 crores in Q3 FY 1
• Further, Interest costs witnessed a decline of 16% y-o-y (-9% YTD)
• Net Income for the group increased by 139% for Q3 y-o-y (YTD basis: +122.8%)

Key Business Updates

• KEC continues to maintain focus towards a healthier balance sheet by reducing the overall borrowing position, which decreased by INR 570 crores – majorly due to lowering of accounts receivables (Gross receivables down from 246 days to 218 days)
• New orders of INR 1,866 crores were recently announced, thus increasing the total order intake to INR 8,634 crores (+26% growth in the YTD order intake)
• Solar order book is slightly less than INR 100 crores. However, KEC still has a large L1 position which is not declared yet & the order book by March end will be much higher.
• KEC’s order book details – 48% is from the international markets (30% of is from MENA, 20% from Africa & CIS, 10% from Far East, 16% from SAARC and SAE is 25%)

Segment Updates

• Sales for the Infrastructure division grew by 33% y-o-y, with major growth coming from railways (+29.6% y-o-y)
• Railways witnessed a significant increase in the order intake in the first-half of the year (Total order intake of INR 1,400 crores this year out of which about INR 1,000 crores will be for OHE)
• SAE – one of the biggest contributor – witnessed an improvement of about 500bps in EBITDA margins. Lower profitability at SAE is majorly due to exchange rate movements
• SAE division has a huge order backlog (about 2 years backlog in Brazil, 6 months backlog in Mexico)
• In cable business, losses have come down majorly due to improvements on the cost side as well as on the design. KEC still faces some headwinds esp. on EHV – mainly because it is a new plant
• Transmission & Distribution constitutes about the major part of the YTD order intake – about 61%. Additionally, YTD order intake for Railways and SAE are 17% and 11% respectively

Company Outlook

• KEC International expects FY 17 revenues to grow around 5% and EBITDA margins to reach 9% (YTD EBITDA margins already at 8.8%)
• Revenues for the Railways division on track to reach INR 450-500 crores for FY 17
• Interest cost to sales is expected to be about 2.7% for the next year
• FY 18 guidance: Revenues expected to grow by 10% to 15% with EBITDA margins at 9%
• Order intake is expected to grow in the range of 15 to 20% over the last year
• Railways division revenues to rise to INR 750 crores and INR 1,000 crores for FY 18 and FY 19 respectively
• Going forward, KEC expects the improvement in margins from Railways – as the company is still closing the old contracts

Downloads

KEC Q3 FY17 Concall Transcript

KEC Q3FY17 Investor ppt