Buy KEC International; target of Rs 365: Motilal Oswal

What happened

Motilal Oswal maintained its BUY rating on KEC International and cut its FY27, FY28 and FY29 earnings estimates by 28%, 29% and 25%, respectively, citing project costs, higher debt and disruptions. It set a revised target price of Rs 365 and expects margins and working capital to improve from FY28.

Confirmed

Global impact / market context

Lower earnings estimates reflect pressure from civil-project costs, supply disruptions and higher debt, which can weigh on profit and cash available. The broker expects improvement only from FY28, so investors face a reported near-term period of operational strain before that recovery outlook takes hold.

Analyst inference

Motilal Oswal’s target is based on projected earnings and a discount to KPIL. The report expects margins and working capital, meaning money tied up in daily operations, to improve from FY28, but says disruptions, legacy projects, higher civil-project costs and debt could weigh on near-term performance.

Analyst inference

What to watch

1. Watch whether Middle East supply disruptions and land acquisition challenges ease, since continued delays could keep project execution and earnings below Motilal Oswal’s reduced estimates. Analyst inference
2. Track civil-project costs and debt levels; the report identifies both as reasons for estimate cuts and says higher debt is expected to affect near-term performance. Confirmed
3. Look for evidence from FY28 onward that margins, or profit earned on work, and working capital, cash tied up in operations, improve as forecast. Analyst inference

Evidence

• Original source link unavailable