KEC International Signals Strong Second Half: Full-Year 8% Margin & 15% Revenue Growth CONFIRMED!

KEC International, part of the RPG Group, has confirmed its full-year financial guidance, expecting to achieve an operating margin of around 8% and a revenue growth of 15%. Managing Director and CEO Vimal Kejriwal stated that the second half of the financial year typically accounts for about 60% of revenue, which will help leverage operations and achieve the annual targets, despite margin pressures faced in the second quarter.

The company reported a significant 19% year-on-year revenue increase in the second quarter. This growth was primarily fueled by its Transmission & Distribution (T&D) business, which saw a remarkable 44% surge. However, this positive trend was partially offset by a decline in the civil construction segment. This segment was impacted by monsoon disruptions, labor shortages, and slowdowns in water projects due to delayed payments.

Delayed payments, especially from the state of Orissa for water sector projects, continue to pose a challenge to cash flows and have led to increased working capital days. This has prompted KEC International to moderate execution in certain projects. The company is actively addressing these payment delays.

Regarding commodity exposure, KEC International indicated it is well-protected. Falling steel prices have been beneficial, and the company maintains a strong hedging strategy for most of its base metal requirements, typically hedging more than 90-95% of its exposure as soon as an order is secured. While rising copper prices might cause some cable clients to delay orders, cables constitute only 8-9% of KEC's total turnover, thus having a minimal impact on overall financial performance.

Impact This news is significant for investors as it provides clarity on the company's full-year outlook, reinforcing confidence in its guidance despite short-term challenges. Confirmation of margin and revenue targets can lead to positive sentiment. Rating: 7/10

Difficult Terms: EPC (Engineering, Procurement, and Construction): A type of contract where a company provides all the services required for a project, from design and engineering to procurement of materials and construction, and finally commissioning. T&D (Transmission & Distribution): Refers to the part of the electricity sector that transmits electricity from power plants to substations and then distributes it to end consumers. Working Capital: The difference between a company's current assets and current liabilities, representing the capital available for day-to-day operations. Hedging: A strategy used to offset potential losses or gains that may be incurred by a companion investment. Commodities: Raw materials or primary agricultural products that can be bought and sold, such as steel, copper, oil, and wheat.