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ENAM Securities Direct 22nd May 2012
KEC International Ltd
ENAM DIRECT EQUITY RESEARCH
CO
MP
AN
Y R
EP
OR
T
Execution Capabilities to Prove the Mettle… KEC International – a RPG group company – is a leading transmission and distribution EPC company with global footprint. It has presence in the verticals of Power Transmission, Power systems, Cables, Railways, Telecom Cables & Water. Investment Argument
Diversified player: KEC Intl. has been a dominant player in the erection and commissioning of the Long distance power transmission towers. KEC has entrenched presence in MENA region and acquisition of SAE Towers (US) (in FY11) has aided the company to explore the business opportunities in The American continent. The company procures its business from 45 countries across S Asia, ME, Africa, Central Asia & Americas.
Consistently rising Order book: The company has a robust order book of Rs 8,572 cr (at the end of Q4FY12), which has been growing consistently despite trend of rising quarterly revenues. With its vast experience in building power transmission lines, KEC could be one of the major beneficiaries of the incremental order flows from PGCIL (PGCIL has planned 9 High Capacity Transmission Corridors (HCTC) at an expense of Rs 58,000 cr in XII the five year plan along with other planned transmission network expansion as discussed on page no 11).
Integration in line with Strategic intent: KEC Intl. had merged RPG Cables in FY10 due to synergies with the Power systems business. The company is investing Rs 175 cr for a green field plant at Vadodara, Guj., with capacity of 4,000 km pa. HT power cable, which is expected to commission by end of Q1FY13. This will increase its total capacity of HT power cable to 5,200 km pa.
Margins expected to improve: Stable margins from transmission towers business coupled with improving margins from new businesses will lead to improvement in overall margins of the company. We estimate the consol. business to report an improvement in margins in FY13E (8.4%) & FY14E (8.5%) over FY12 (8.1%).
Valuation KEC Intl. – a well diversified company both in terms of business segments and geographies- has been exhibiting a robust order book (Rs 8,572 cr at end of Q4FY12) with visibility of ~18 months based on FY12 revenues. KEC Intl. is expected to be one of the major beneficiaries of the new tenders from PGCIL and enhanced spends on power transmission sector in XIIth five year plan. We estimate the company to grow at CAGR of 15% and 19% between FY12-FY14E on topline and bottomline, respectively. We initiate BUY on the stock with target price of Rs 76 giving an upside of 49%.
CMP (Rs) 51 Target price (Rs) 76 Potential upside 49%
Stock data
No. of shares (Cr) 25.7
FV (Rs) 2/-
Market cap (Rs Cr) 1,311
52 wk high/low (Rs) 95/32
Avg. daily vol* (shrs) 363744
BSE Code 532714
NSE Code KEC
Bloomberg code KECI IN
Reuters Code KECL.BO
*BSE 6 monthly
Shareholding (%)
Mar-12 QoQ chg Promoter 43.11 1.12
FIIs 2.26 (0.14)
MFs / UTI 32.11 (0.59)
Banks/FIs 6.85 (0.07)
Others 15.7 (0.32)
Relative performance
10000
12000
14000
16000
18000
20000
May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12
20
30
40
50
60
70
80
90
BSE_SENSEX K E C International Ltd Source: Cline, ENAM Direct Research
Pankaj Bobade [email protected]
Financial summary Y/E March
Sales (Rs Cr)
PAT (Rs Cr)
EPS (Rs.)
Change (YoY %)
P/E (x)
RoE (%)
RoCE (%)
EV/EBITDA (x)
DPS (Rs)
2010 3907 190 7.4* 62.4 - 27.5 27.4 - 1.2* 2011 4474 206 8.0 8.4 - 23.2 21.3 - 1.2 2012 5735 210 8.2 2.3 - 20.1 17.4 - 1.2 2013E 6657 243 9.5 15.8 5.4 19.9 20.1 4.3 1.2 2014E 7525 295 11.5 21.3 4.4 20.4 21.1 3.9 1.2
* Adjusted for stock split in FY11, ENAM Direct Estimates
BUY
22nd May 2012 ENAM Securities Direct 2
KEC International Ltd
BUSINESS Expanding Horizons…
KEC International – RP Goenka Group Company is a leading EPC contractor in Power Transmission and distribution segment. The company undertakes design, testing and manufacturing of Towers & Cables, project management, construction of turnkey projects in areas of Power transmission, Power distribution, Telecom, Railways and Water Infrastructure projects. With rich skill sets in executing Power transmission projects, KEC has entered into the sunrise Water Infrastructure and Railway segments, which are expected to attract high governmental and private spending in near future.
Revenue Break Up
0%
10%
20%
30%
40%
50%
60%
FY10 FY11 FY12 FY13E FY14E
Transmission (Intl.) Transmission (S Asia/ domestic) SAE
Power Sys (Intl. + Domestic) Cables Telecom
Railways Water Source: Company, ENAM Research
KEC’s efforts to become a diversified player, both in terms of geographies and business segments, are yielding good results. The company has been successful in reducing its dependence on its revenues from Transmission Segment (both domestic & overseas) from 79% in FY10 to 75% in FY12 and we estimate it to further come down at around 61% by FY14E.
Order Book Break Up- Business wise Order book Break Up- Geography wise
69%
18%
2%4%4% 3%
Transmission Power Sys. Cables
Railways Telecom Water
44%
24%
13%
16% 3%
South Asia Africa/Central Asia MENA
Americas Others Source: Company, ENAM Research
22nd May 2012 ENAM Securities Direct 3
KEC International Ltd
The company holds order book of Rs 8,572 cr at the end of Q4FY12, which gives a visibility of ~18 months on the run rate based on FY12. The order book has not only been steadily building up despite rising quarterly revenues (as depicted in the chart below), but also almost doubled (~1.7x) over the period of last 12 quarters.
Qtr.ly Revenues Vs. Order Book
4000
5000
6000
7000
8000
9000
10000
Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12
(Rs
cr.)
500
700
900
1100
1300
1500
1700
1900
2100
2300
(Rs
cr.)
Order Book (Rs cr.) (LHS) Qtrly Revenues (Rs cr.) (RHS)
Source: Company, ENAM Research
KEC Intl. could be one of the beneficiaries of the transmission capex to be undertaken domestically by PGCIL, SEB, Central Trading Units (CTU), State Trading Units (STU) etc. (the size of opportunity available is discussed in annexure I on pg. 11). Moreover, being a global player, the enormity of the opportunities (as discussed in the annexure II below on pg. 12 & 13) available for the company, to connect power producing centers (using renewable and non renewable sources) and power consumers are huge.
We believe that KEC Intl. could be in advantageous position to bag few of these contracts due to its a) expertise and technical prowess in handling big size projects b) historical ability to successfully execute projects even in inhospitable terrains.
22nd May 2012 ENAM Securities Direct 4
KEC International Ltd
Margins set to improve on account of higher efficiencies in new business:
EBIDTA Margins
11.8
10.4 10.39.8 10.0 10.1
11.6
10.5
9.4
7.27.7
8.2 8.1 8.08.5
8.88.5
6
7
8
9
10
11
12
13
Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113E Q213E Q313E Q413E FY 14E
Source: Company, ENAM Research
KEC has been successfully maintaining its double digit operating margins till FY11, but has suffered in last 3 quarters. We are of the opinion that the company is past its nadir, although, margins may amble around higher single digit. With the sunrise business (marked by entry level pricing to garner business) starting to perform, we feel that KEC Intl. will be on its path to reap the benefits of diversifying into new growth avenues viz. Railways, BoP and Cables, though the margins (from new business initiatives) would be muted as per our estimates. With rich experience of Railway electrification projects, KEC Intl. is expanding into other Railway opportunities like track laying, civil infrastructure, signaling and telecommunications. Having acquired Jay Railway Signaling, KEC Intl. has made a foray in Signaling and Telecommunications space and is now eyeing an opportunity to execute the entire gamut of Railway Infrastructure projects. Going forward, Indian Railways is expected to build on, expand and modernize its existing infrastructure to meet the needs of growing economy. Addition of new lines, gauge conversion, de-congestion of existing routes and the dedicated freight corridors are few of the objectives on cards for Indian Railways. Similarly, the mass rapid transport system like Metro Rail in different cities is also offering business opportunities for companies operating in Railways turnkey project segment. We are of the opinion that KEC Intl. would be in better position to make the most of the opportunities available due to its all-round experience from Signaling to EPC contracts.
22nd May 2012 ENAM Securities Direct 5
KEC International Ltd
KEC Intl. stands tall in the crowd
Diversified portfolio across business segments and geographies
Rich experience in timely executing large size Power Transmission EPC orders
Ahead of competition by having entrenched presence in the Developed market esp. American continent through SAE Towers.
Rising order book (Rs 8,572 cr at the end of Q4FY12) gives a visibility of ~1.5 yrs based on FY12 revenues
Efficient working capital management vis-à-vis peers.
Peer Comparison based on FY11 Cash Conversion cycle for KEC Intl.
120
130
140
150
160
KEC Kalpataru Jyoti Str.
(day
s)
10%
15%
20%
25%
30%
35%
(%)
Cash Conversion Cycle (days) (LHS)WC as % of Sales (RHS)
110
134
40
0
20
40
60
80
100
120
140
160
FY10 FY11 FY12
(Day
s)
Comparison made on FY11 as audited data for FY12 not available for all peers
Source: ENAM Research
The company efficiently manages the raw material cost, which happens to be the largest contributor (59% for FY12) to the expenditure. 60% of the order book has price variation clause and the company protects its margins by hedging its raw material for rest of the orders.
Commissioning of the Greenfield Cable plant at Vadodara in Q1FY13 to add value.
KEC Intl. has been one of the leaders in Indian Tower business bagging a tenth of Tower orders from PGCIL in 3 out of the last 4 yrs. (refer tables on page no 8). With new orders on anvil from PGCIL stable, we feel KEC would be able to maintain this run rate.
Moreover, the company enjoys vantage as it is qualified for and executing projects 765+ kV projects with PGCIL. KEC Intl. had bagged the 765 kV tower project way back in 2008 worth Rs. 133 cr for Sasaram Fatehpur transmission line associated with DVC Maithon Right Bank Project and has been successful in wining substantial portion of orders awarded in last 2 yrs (refer table on page no 8). KEC Intl. will be one of the major beneficiaries of tendering for extra high voltage transmission capex by PGCIL and intercontinental HVDC grids.
Better Return Ratios- KEC has better RoEs vis-à-vis its peers (refer the chart)
22nd May 2012 ENAM Securities Direct 6
KEC International Ltd
RoE comparisons for Power Transmission Peers for FY11
KEC Intl. RoE (%)
23.2
14.918.7
0
5
10
15
20
25
(%)
KEC Intl. Kalpataru Jyoti Structures
27.5
23.220.1
0
5
10
15
20
25
30
FY10 FY11 FY12
Comparison made on FY11 as audited data for FY12 not available for all peers
Source: ENAM Research
Improving Ratios
KEC Intl. has witnessed drop in its return ratios in recent past, due to fall in both NPM and asset turn. We feel that the worst is over for the company and expect the ratios to improve on account of improving margins and asset turn, although we do not expect the company to scale the historical highs in next 2 yrs.
FY10 FY11 FY12 FY13E FY14E Net Margins (%) 4.9% 4.6% 3.6% 3.7% 3.9% Asset turnover (x) 2.8 2.2 2.4 2.6 2.7 RoA (%) 13.4% 10.2% 8.7% 9.6% 10.7% Leverage (x) 2.0 2.3 2.3 2.1 1.9
Return on Equity (%) 27.5% 23.2% 20.1% 19.9% 20.4%
Source: ENAM Research
Trends in Return Ratios
5
10
15
20
25
30
FY10 FY11 FY12 FY13E FY14E
(%)
RoE RoCE
Source: ENAM Research
22nd May 2012 ENAM Securities Direct 7
KEC International Ltd
Valuations
KEC Intl. is in the business of executing EPC turnkey projects in Power Transmission sector. In addition, the company has entered into Water Infrastructure and Railways Sectors too. The company has delivered strong sales growth and healthy build up in its order book. In the recent past, the operating margins have been contracting on account of entry in low margins in the sunrise business segments and competition in the domestic transmission business. Going forward, the margins are set to improve as the company has now started to bid on competitive terms for the new as well as old business segments.
KEC is currently trading at 5.4x FY13E and 4.4x FY14E which is below the historical mean of 10x (one year forward) on account of the concerns about the incremental order book for the sector as a whole and the weak sentiments across asset classes. Going forward, we feel that the commencement of new order book issuance from PGCIL, CTU/STU for XIIth 5 year plan would be a key trigger for rerating of the entire sector. We are of the opinion that KEC would be the key beneficiary of this improvement in sentiments towards the sector per se. Moreover, improvement in margins will also augur well for the stock. We initiate coverage on KEC Intl with target price of Rs. 76 based on 8x FY13E EPS, implying an upside of 49% over CMP. Historically, the average 12 month forward PE for KEC Intl. has been 10x.
KEC International -12mth fwd P/E (x)
02468
101214161820
Aug-08 Jan-09 Jul-09 Dec-09 Jun-10 Nov-10 May-11 Nov-11 Apr-12
Source: Bloomberg, ENAM Research
Risk Factors:
Delay in award/ Cancellation of Projects
Weaker than expected execution
Slowdown in Power generation investment activities, eventually affecting transmission related capex
Sharp rise in Steel/ Aluminium prices
22nd May 2012 ENAM Securities Direct 8
KEC International Ltd
TABLES PGCIL Order Mix (%)
FY09 FY10 FY11 FY12
Transformers/ Reactors 9 21 6 13
Towers 26 37 34 39
Insulators 4 8 2 3
Conductors 32 12 16 25
Substations 12 17 39 13
Rural Electrification 16 2 0 0
Civil 0 1 2 1
Others 1 3 1 6
Source: PGCIL, ENAM Research
PGCIL Tower Projects Awarded (%)
FY09 FY10 FY11 FY12
KEC Intl. 10 2 12 9
Kalpataru 11 5 12 3
Jyoti Structures 10 11 0 7
Tata Projects 13 22 20 19
Gammon 0 2 5 14
ATSL 34 1 0 0
L&T 11 9 6 10
Others 11 48 45 38
Source PGCIL, ENAM Research
PGCIL Tower Projects 765+ kV (%)
FY09 FY10 FY11 FY12
KEC Intl. 38 0 11.5 12.5
ATSL 42 0 0 0
EMCO 20 0 0 0
Tata Projects 0 38 25.6 35.7
Gammon 0 10 4.6 14.6
Kalpataru 0 0 15.8 11.8
L&T 0 0 9.1 7.9
Others 0 52 33.4 17.5
Source: PGCIL, ENAM Research
22nd May 2012 ENAM Securities Direct 9
KEC International Ltd
COMPANY FINANCIALS (CONSOL.) Income Statement (Rs Cr)
Y/E Mar FY10 FY11 FY12 FY13E FY14E
Net sales 3,907 4,474 5,735 6,657 7,525
Other operating income 0 0 79.7 0 0
Total income 3,907 4,474 5,815 6,657 7,525
Cost of goods sold 3,284 3,743 5,046 5,759 6,513
Contribution (%) 16.0% 16.4% 12.0% 13.5% 13.5%
Advt/Sales/Distrn O/H 217.7 269.1 300.9 340.8 376.2
Operating Profit 406 462 468 557 636
Other income 9 9 0 0 0
PBIDT 415 472 468 557 636
Depreciation 27 41 48 48 50
Interest 94 114 149 134 131
E/o income / (Expense) 0 0 54 0 0
Pre-tax profit 293 317 325 375 454
Tax provision 104 111 115 131 159
Adjusted PAT 190 206 175 243 295
Reported PAT 190 206 210 243 295
Balance Sheet (Rs Cr)
Y/E Mar FY10 FY11 FY12 FY13E FY14E
Total assets 1,620 2,428 2,398 2,655 2,886
Gross block 835.7 1,038.2 1,206.5 1,374.8 1,553.0
Net Block 678.7 801.6 922.0 1,041.8 1,169.8
Goodwill 0.0 281.3 320.9 320.9 320.9
CWIP 41.3 39.3 73.0 17.8 15.0
Investments 0.0 0.0 0.0 0.0 0.0
Wkg. cap. (excl cash) 830 1,145 879 1,075 1,268
Cash / Bank balance 69.8 161.4 203.0 199.1 111.6
Capital employed 1,620 2,428 2,398 2,655 2,886
Equity capital 49.3 51.4 51.4 51.4 51.4
Reserves 738 895 1,056 1,252 1,500
Borrowings 787 1,432 1,239 1,303 1,288
Def tax Liabilities 46.1 49.7 51.0 48.1 46.6
Source: Company, ENAM Direct Research
22nd May 2012 ENAM Securities Direct 10
KEC International Ltd
Ratio Analysis (%)
Y/E Mar FY10 FY11 FY12 FY13E FY14E
Sales growth 14.0 14.5 28.2 16.1 13.0
OPM 10.4 10.3 8.1 8.4 8.5
Oper. profit growth 34.8 13.9 1.3 18.9 14.2
COGS / Net sales 84.0 83.6 88.0 86.5 86.6
Overheads/Net sales 5.6 6.0 5.2 5.1 5.0
Depreciation / G. block 3.2 3.9 4.0 3.5 3.2
Effective interest rate 13.4 10.3 11.2 10.5 10.1
Net wkg.cap / Net sales 0.17 0.22 0.18 0.15 0.16
Net sales / Gr block (x) 4.7 4.3 4.8 4.8 4.8
RoCE 27.4 21.3 17.4 20.1 21.1
Debt / equity (x) 1.0 1.5 1.1 1.0 0.8
Effective tax rate 35.3 35.1 35.4 35.0 35.0
RoE 27.5 23.2 20.1 19.9 20.4
Payout ratio (Div/NP) 19.0 17.4 17.0 14.7 12.1
EPS (Rs.) 7.4 * 8.0 8.2 9.5 11.5
EPS Growth 62.4 8.4 2.3 15.8 21.3
CEPS (Rs.) 8.4 * 9.6 10.0 11.4 13.4
DPS (Rs.) 1.2* 1.2 1.2 1.2 1.2
*Adjusted for stock split in FY11
Cash-flow (Rs. Cr)
Y/E Mar FY10 FY11 FY12 FY13E FY14E
Sources 442 888 17 305 281
Cash profit 311 361 407 426 477
(-) Dividends 36 36 36 36 36
Retained earnings 275 325 371 390 441
Issue of equity 0.0 2.1 0.0 0.0 0.0
Change in Reserves 75.5 (12.5) (13.3) (12.0) (12.0)
Borrowings 165 645 (193) 64 (15)
Others (73) (72) (148) (137) (133)
Applications 442 888 17 305 281
Capital expenditure 191 482 242 113 175
Investments 0 0 0 0 0
Net current assets 323 315 (266) 196 193
Change in cash (71) 92 42 (4) (87)
Source: Company, ENAM Direct Research
22nd May 2012 ENAM Securities Direct 11
KEC International Ltd
ANNEXURE I
Transmission and Distribution in XIIth Five year plan: Indian Power Generation has an
installed capacity of 185 GW at the end of Nov., 2011 and is targeted to add another
100GW by end 2017 (i.e. XIIth 5 yr plan). The electricity distribution network in India is
inefficient as the losses stand at staggering 32% compared to the world average of <15%.
Loss reduction technologies, if adopted in India, can add about 30 GW of electric power,
simultaneously reducing the cost per unit and carbon footprint pollution per unit
consumed. In its endeavour to erect an efficient Transmission network, PGCIL is
working on to set up 9 High Capacity Transmission Corridor (HCTC) at an expense of Rs
58,000 cr (approx.) in the XIIth five year plan. Moreover, the XIIth five year plan has also
charted out an ambitious expansion of Transmission capacity by >40% and ~70% increase
in substation capacity over the achieved target of XIth five year plan.
Tentative XIIth Five year plan for Capacity addition in Power Transmission segment:
Transmission Lines Unit End of Xth
plan Tgt at End of XIth plan (E)
Status as on Jan. 31st, 2012
Tgt at End of XIIth plan (E)
765 kV ckm 1,704 7,132 6,190 31,164
HVDC +/- 500 kV ckm 5,872 11,078 9,432 18,892
High Voltage Transmission ckm 7,576 18,210 15,622 50,056
HVDC 200 kV Monopole ckm 162 162 162
400kV ckm 75,722 125,000 114,998
230/220 kV ckm 114,629 150,000 138,729
Low Voltage Transmission ckm 190,513 275,162 253,889 328,955
Total Transmission ckm 198,089 293,372 269,511 379,011
Source: CEA, ENAM Research
XIIth five year plan has charted out plans to enhance the capacity of Transmission lines by
109,440 ckt. kms and substation capacity by 270,000 MVA. The majority of lines
(aggregating 27,000 ckt. kms) will be at 765 kV voltage level. The High Voltage Direct
Current (HVDC) capacity is expected to increase twofold, from 13,500 MW to 26,500 MW,
by the end of Twelfth plan. The interregional transfer capacity addition target is 37,800
MW, which would take the total transfer capacity to 63,450 MW by March 2017. The total
Transmission line enhancement (by about >40%) & Substation capacity expansion (by
~70%) by the end of XIIth Five year plan over the capacity at the end of Jan. 2012- calls for
Rs. 5,00,000 cr (approx.) of spend in both Transmission and distribution segment. We
expect a deluge of order tendering in first 3 years of XIIth five year plan starting 2012.
KEC has been regular recipient of orders from PGCIL and the latter contributes around
15% of the current total order book (Rs 8,572 cr at end of Q4FY12) of KEC Intl.
22nd May 2012 ENAM Securities Direct 12
KEC International Ltd
ANNEXURE II
International opportunities: KEC Intl. sources >50% business from outside India. It has presence in American continent, MENA and African region. The company had acquired a leading manufacturer of lattice towers - SAE Towers in FY11 at an enterprise value of USD 95 mn with an eye on the upcoming opportunities in American continent. SAE Towers enjoys dominant market position in Brazil, US and Canada. Brazil is hosting two major sporting events viz. FIFA in 2014 and Olympics in 2016. In order to meet its electrical power needs (80% of which is generated through Hydropower plants located in North and North East parts of country and energy consumption in Southern parts), the country needs robust network of transmission towers. Similarly, replacement of ageing transmission infrastructure and new transmission network connecting the renewable energy sources (which accounts for the 60% of the incremental power generation) to the national grid are some of the business opportunities in USA. As per the Edison Electric Instt. (EEI), the Shareholder owned Utilities in N. America have planned an average investment of $13.7 bn for next 3 yrs. Moreover, EEI has projected a cumulative transmission investments of $298 bn over 2008-2030 based on Transmission Addition method.
Actual and Planned Transmission Investment By Shareholder-Owned Utilities (2005-2014)
Annual Transmission Investment Projection Transmission Additions Method (2008)
Source: EEI updated on Sep 2011. Source: EEI.
With acquisition of SAE Towers, KEC is well equipped to bid and win opportunities coming its way. Moreover, the margins enjoyed by SAE, US are better than that enjoyed by the company in its domestic operations.
Opportunities are emerging from the continent of Africa which is bracing itself for higher single digit growth. As per UN estimates, only ~20% of the African population (excluding S. Africa & Egypt) have direct access to electricity. Rising urbanization trend is calling for enhanced demand of power and hence, a robust transmission and distribution network in the coming decade. The African continent has embarked upon ambitious electricity generation plan - both renewable and non renewable- through next 2 decades. The power generation capacity is expected to rise at a CAGR of ~3% over next 30 yrs involving an outlay of USD 12.5 bn. The opportunity to build power transmission and distribution network is ~USD 10 bn for the same period.
22nd May 2012 ENAM Securities Direct 13
KEC International Ltd
African Electricity generation to double by 2035 - Big power investment ahead
Power investment needs per year through 2015
Rehabilitations: USD4 bn
New transmission and distribution: about USD10 bn
New generation: about USD12.5 bn
Source: ABB, Enam Research
With its established presence in African continent, KEC is well braced for bidding the
opportunities coming its way.
New International Opportunities awaiting: Post nuclear disaster at Fukushima, Japan,
plans are afoot, among the developed nations, to accelerate the deployment of Renewable
Energy as an alternative to the fossil fuels and nuclear power. Think tanks across the globe
are working to secure sustainable Renewable energy resources and connect them to the
consumption centers. The idea of erecting wind power mills at places having optimum
wind speed, concentrating solar power (CSP) installations (with thermal storage) at places
receiving optimal (read maximum) sunlight, harvesting Hydro/ Tidal energy and
connecting all these geographically dispersed sources of energy to the consumption centre
miles away through HVDC lines- creating Renewable Energy Superhighway- is fast taking
shape in both developed and developing nations. In an attempt in this direction,
DESERTEC Foundation along with Japan Renewable Energy Foundation (JREF) is
promoting to set up an Asian Super Grid initiative to facilitate an electricity supply system
based fully on Renewable energy in Asia. This initiative envisions the interconnection of
the national grids of Japan, Korea, China, Mongolia, Russia with low loss HVDC
transmission lines. These transmission lines would enable the delivery of electricity from
the region’s most abundant renewable energy sources to its centers of demand whilst
simultaneously balancing out the peaks and troughs of fluctuating renewable energy
sources over a wider area. A concept of similar grid connecting EU & MENA will be
implemented by the consortium Dii GMbH, formed by group of European companies and
22nd May 2012 ENAM Securities Direct 14
KEC International Ltd
the DESERTEC foundation. Even though, the value of the opportunity available cannot be
ascertained, it will be enormous in size.
Source: ENAM Research
Any ambitious project on the lines of DESERTEC- EUMENA would be a business
opportunity for companies like KEC Intl., who undertake Power & Transmission EPC
turnkey projects on global scale. Global Focus on renewable/ clean energy coupled with
escalating demand (~35%) over coming 2-3 decades calls for sizable investment in efficient
energy transport.
22nd May 2012 ENAM Securities Direct 15
KEC International Ltd
CONFLICT OF INTEREST DISCLOSURE
We, at ENAM, are committed to providing the most honest and transparent advice to our clients. However, given thenature of the capital markets, from time to time we are faced with situations that could give rise to potential conflict ofinterest. In order to provide complete transparency to our clients, before we make any recommendations, we arecommitted to making a disclosure of our interest and any potential conflict IN ADVANCE so that the interests of ourclients are safe- guarded at all times. In light of this policy, we have instituted what we believe to be the mostcomprehensive disclosure policy among leading investment banks/brokerages in the world so that our clients may make an informed judgment about our recommendations. Thefollowing disclosures are intended to keep you informed before you make any decision- in addition, we will be happyto provide information in response to specific queries that our clients may seek from us. Disclosure of interest statement (As of 17th April, 2012) 1. Analyst ownership of the stock No 2. Firm ownership of the stock No 3. Directors ownership of the stock Yes 4. MBD Relationship No 5. Broking relationship No
We are committed to providing completely independent and transparent recommendations to help our clients reach a better decision.
This document has been prepared by Enam Securities Direct Private Limited – Privileged Client Group. Affiliates of Enam Securities Direct Private Limited focused on Institutional Equities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating and target price of the Affiliates research report. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgement by any recipient. 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