KEC International's stock has fallen 63% from its peak despite the company maintaining a record order book of ₹36,267 crore as of FY26, according to latest market analysis. The dramatic stock decline reflects investor concerns over the company's weak cash generation and persistent margin pressure that have persisted despite strong order inflows. At 22 times trailing earnings, the stock trades in line with peers like Kalpataru Projects but below Skipper at about 27 times, suggesting the market is pricing in structural cash flow challenges rather than growth prospects.
Motilal Oswal has issued a 'Buy' rating on KEC International with a target price of ₹580 in its research report dated August 11, 2026, while Nomura maintains a 'Neutral' rating with a revised target price of ₹495. The divergent recommendations reflect different brokerage assessments of the company's near-term prospects, with Motilal Oswal maintaining its valuation at a PE of 16x two-year forward earnings while Nomura values the stock at 15x June 2028F EPS. According to the latest reports, the stock is currently trading at a P/E of 16.7x/12.1x on FY27/28E earnings.
KEC International reported a weak Q1FY27 performance with revenue broadly flat YoY and EBITDA margin declining 118bps YoY to 5.8%, as reported by Nomura. The margin pressure was attributed to higher fuel, freight and logistics costs, with EBITDA declining 17% and missing brokerage estimates by 7-13%. The company's recurring PAT fell 42% year-on-year, coming in 12-24% below Nomura's and consensus estimates respectively. Despite maintaining a strong ₹377bn order book with a book-to-bill ratio of 1.6x, near-term execution remains challenging due to geopolitical disruptions, labour shortages and payment delays. The order pipeline remained healthy at ₹2 trillion, including ₹1 trillion from T&D, though conversion into orders will be key.
KEC's cash flow problems have been severe and persistent, with the company converting just 17% of its cumulative EBITDA into operating cash between FY20 and FY26, according to latest analysis. The company's net working capital days reached 134 days as of Q1FY27, compared with peer Kalpataru's 80 days, indicating a structural inefficiency in cash conversion. Trade receivables of ₹6,474 crore represent only one-third of what customers owe KEC, with unbilled revenue of ₹7,409 crore and retention money of ₹4,923 crore creating a total owed by customers of ₹18,602 crore. The first quarter of FY27 showed debt reduction of ₹154 crore but maintained flat revenue at ₹5,024 crore, reflecting the company's choice to prioritize cash collection over growth.
The Transmission & Distribution (T&D) segment maintained double-digit margins with sufficient cushion to mitigate commodity price volatility, according to management. However, civil and transportation segments currently operate at negligible margins due to delayed project commissioning and elevated operating costs, while cables margin stands at 5%. The Cables segment delivered robust 57% YoY revenue growth, with specialty cables providing scope for further mix and margin improvement. Renewables witnessed healthy order traction, supporting business diversification efforts. Motilal Oswal expects execution ramp-up and debt reduction in 2HFY27 to be the key performance drivers.
Management has retained FY27 revenue growth guidance of 12-15%, expecting execution to pick up gradually from Q3, as reported by Nomura. However, the brokerage noted that KEC missed a similar revenue growth guidance in FY26. Further, KECI withheld EBITDA margin guidance given ongoing uncertainties but stated expectations for improvement from Q3. The brokerage expects execution to remain challenging as West Asia conflict, payment delays in water projects and labour shortages continue to weigh on operations. Working capital remains a key monitorable, with a 110-day target by FY27-end.
