KEC International (KEC)

FairStock Score: 50/100 — MIXED

Score breakdown: P/E: 1/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Sales growth of 19.41% and profit growth of 75.54% show strong near-term momentum.
• Piotroski F-Score of 8/9 and ₹373 Cr free cash flow indicate improving fundamental health.
• ROCE of 17.98% and ROE of 12.74% are respectable in the capital-intensive construction sector.
• Promoter holding of 50.10% aligns management interest with minority shareholders.
• DCF intrinsic value of ₹749.55 is above the current market price, though it depends on assumptions.

Concerns

• Latest quarter net margin is very thin: ₹127 Cr on ₹6,001 Cr sales, about 2.1%.
• Debt/equity of 0.94 and Altman Z-Score of 2.00 point to moderate financial stress risk.
• No margin of safety on Graham basis: price ₹580.10 vs Graham Number ₹344.91, with margin of safety -69.70%.
• EV/EBITDA of 177.97 and 52-week volatility from ₹438 to ₹937.80 underline cyclical and valuation risk.

AI Analysis

At first glance, KEC looks like an improving business. Sales are up 19.4%, profit has jumped 75.5%, and the Piotroski score of 8/9 suggests the financial statements are getting healthier. Free cash flow of ₹373 crore is positive, and ROCE of 17.98% is respectable for an engineer-constructor. But I must think like an owner, not a ticker watcher. The latest quarter reveals the true economics: ₹6,001 crore of revenue produced only ₹127 crore of net profit. That is a 2.1% net margin — a razor-thin figure that leaves enormous sensitivity to input costs, receivables, and project delays. Construction is a competitive tender business, not a franchise with pricing power. Promoter holding at 50.1% is an alignment point, but debt/equity of 0.94 and an Altman Z-score of 2.00 remind me the balance sheet needs discipline. Valuation is the real issue. At ₹580.10, I would be paying 21.4 times earnings and 2.9 times book for a business whose Graham Number is only ₹344.91. The stated margin of safety of -69.70% tells me I have no cushion against the Graham yardstick. A DCF value of ₹749.55 sounds comforting, but in a cyclical sector, small changes in margin or working capital can destroy projected cash flows. The 52-week range from ₹438 to ₹937.80 shows how violent Mr. Market can be. An EV/EBITDA of 177.97 also raises a red flag about the enterprise valuation. I appreciate the recent growth and the free cash flow, but I cannot call this a simple fast grower — it is a cyclical wearing a growth costume. I would wait for a lower price or durable evidence of margin expansion before committing capital.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer