Motilal Oswal has kept a 'BUY' rating on KEC International but lowered the target price to ₹580. While the company faces margin pressure—with Q1 profit falling 42% due to supply chain issues—it maintains a healthy order book of over ₹40,000 crore. Investors are focused on debt reduction and project execution in the second half of the year.
Motilal Oswal has maintained its positive 'BUY' rating for KEC International, although it has lowered the target price to ₹580 per share. This move comes as the stock has faced selling pressure, trading near its 52-week lows, reflecting investor caution following the company's recent quarterly earnings announcement.
Financial performance for the first quarter of fiscal year 2027 shows a mix of strengths and challenges. While the company's revenue remained flat at ₹5,024 crore, its net profit dropped 42% year-on-year to ₹73 crore. Profit margins were a key area of concern, compressing to 5.8% from 7.0% in the previous year. The brokerage firm noted that this dip was driven by persistent cost pressures and supply chain disruptions, particularly those stemming from the ongoing crisis in West Asia, which delayed project timelines and increased operational costs.
Despite these near-term difficulties, the brokerage remains positive on the company's long-term prospects. KEC International has built a strong pipeline of business, with its order book and 'L1' position—where it is the lowest bidder for potential projects—now exceeding ₹40,000 crore. Furthermore, the company has managed to reduce its net debt by over ₹150 crore, bringing the total debt to ₹6,568 crore. This effort to lower debt is seen as a supportive factor for the company's balance sheet strength.
To account for the uncertainty regarding how quickly profit margins can recover, Motilal Oswal has adjusted its valuation multiple for the company, moving it down from 18x to 16x. This downward adjustment reflects a more cautious outlook on near-term profitability. The brokerage anticipates that improved execution and a potential performance turnaround in the second half of the fiscal year will be the next major drivers for the stock.
For investors, the most critical factors to track in the coming quarters will be the speed of project execution in the civil and water segments, and whether the company can successfully stabilize its profit margins. Stabilizing costs amidst ongoing global supply chain disruptions remains the primary test for the management team.