- KEC’s order inflow stays robust at INR 193 billion, creating a massive INR 367 billion order backlog.
- Margin estimates trimmed for FY26‑28, yet valuations remain attractive at 18‑14.3× FY27‑28 P/E.
- Transmission & Distribution (T&D) and cable segments continue to outpace peers.
- Potential downside from delayed claim settlements and labor constraints.
- Revised target price INR 890 offers ~12% upside from current levels.
You’re overlooking KEC International’s hidden earnings catalyst—don’t let it slip.
Motilal Oswal’s latest research highlights that KEC posted in‑line Q3 FY26 results, but the numbers were softened by labor bottlenecks and a dip in margins across select lines. The silver lining? A still‑thick order book of INR 367 billion, fueled by a fresh INR 193 billion inflow for the nine‑month period. That depth gives KEC a runway to ride through short‑term headwinds and still capture the upside of a booming power‑infrastructure market.
Why KEC International’s Margin Dip Mirrors Industry Pressures
Margin compression isn’t unique to KEC. The power‑equipment space is wrestling with rising raw‑material costs, tighter credit cycles, and labor shortages that push project timelines. KEC’s EBITDA margins are projected at 7.2% for FY26 and 7.6% for FY27‑28, modestly lower than the 8%‑9% range seen in a more tranquil cycle. Motilal Oswal has trimmed margin forecasts by 15% for FY26 and 8% for the subsequent two years, primarily due to expected delays in claim settlements—a cash‑flow timing issue rather than a permanent profitability hit.
KEC International’s Order Book: A Fortress in a Volatile Market
The order backlog is the single most compelling metric for capital‑intensive infrastructure firms. At INR 367 billion, KEC’s order book sits well above the industry average, giving the company the flexibility to prioritize high‑margin projects and negotiate better payment terms. Moreover, the order mix is heavily weighted toward Transmission & Distribution (T&D) and cable solutions—segments that have benefitted from the Indian government’s aggressive push for grid expansion and renewable‑energy integration. This strategic focus aligns KEC with the country’s target of 450 GW of renewable capacity by 2030, ensuring a steady pipeline of projects.
How Competitors Tata Power and Adani Power React to the Same Trends
While KEC leans on its engineering prowess, peers like Tata Power and Adani Power are expanding vertically into EPC (Engineering, Procurement, and Construction) services. Tata’s recent acquisition of a minority stake in a cable manufacturer mirrors KEC’s emphasis on cable‑segment growth, but Tata’s broader utility portfolio cushions margin volatility. Adani, on the other hand, is leveraging its massive renewable‑project pipeline to cross‑sell infrastructure services, potentially compressing margins further as it undercuts pricing to win contracts. KEC’s niche—high‑specification transmission equipment—positions it as a specialist rather than a generalist, allowing it to command premium pricing where it matters most.
Historical Parallel: What the 2013 Power‑Infrastructure Cycle Teaches Us
Back in 2013, India’s power‑infrastructure sector faced a similar margin squeeze due to delayed payments from state utilities. Companies that maintained strong order books, like KEC’s predecessor, emerged stronger after the cycle normalized, posting double‑digit EPS growth in FY15‑16. The lesson is clear: short‑term margin dips can be survivable if the order pipeline remains robust and the firm can manage working‑capital efficiently.
Investor Playbook: Bull vs. Bear Scenarios for KEC International
Bull Case: The order backlog continues to expand, claim settlements improve, and labor constraints ease as the government incentivizes skilled‑trade training. Under these conditions, KEC can lift EBITDA margins to 8%‑9% by FY28, pushing its P/E multiple to the 20×‑22× range. At a revised target price of INR 890, the stock offers roughly a 12% upside from current levels, with upside potential increasing to 20%‑25% if the FY27‑28 earnings beat consensus.
Bear Case: If claim settlements remain delayed and labor shortages intensify, margins could slip further, dragging the P/E down to the low‑teens. Additionally, aggressive pricing wars led by larger conglomerates could erode KEC’s pricing power, forcing a downward revision of revenue CAGR from 17% to the high‑single digits. In that scenario, the stock could trade below INR 750, eroding the near‑term upside.
Overall, KEC International sits at a crossroads where a strong order book and sector tailwinds outweigh the temporary margin setbacks. Savvy investors can treat the current price as a discount to a fundamentally sound business, especially if they keep an eye on claim‑settlement timelines and labor‑market developments.