KEC International Q3FY17 Concall Summary

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%)

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%)

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

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