The companies in power transmission space have delivered a strong performance in the past. KEC International has witnessed a CAGR of 36.7% in topline for last three years, the strong performance is on the back of large investment in power infrastructure. Going forward we do not expect any let up in outlays on power infrastructure, we believe KEC International continues to remain an attractive investment and a company with strong earnings visibility over the next three years.

Internationally Transmission & Distribution sector is expected to witness an investment of $ 424bln in next five years. KEC International with more than 70% of its order book from international business seems well set to take advantage of the available opportunity.hance inter-regional power transfer capacity from present 9000 MW to 30000MW by 2012

The domestic Power Transmission sector has seen a boom in last few years and we expect it to sustain for the coming 4 – 5 years driven by government plans to add more than 1,00,000 MWs power generating capacity till 2012.

KEC has formed a Joint Venture in USA with Power Engineering Inc. to enter the North American market (North America currently accounts for only 1% of the total order book).

Current order book of company stands at Rs 30bln (Rs. 24bln from international segment and Rs. 6bln from domestic segment) which is 1.4x FY07 net sales offering visibility for the future growth.

We expect KEC International to report topline CAGR of 23% for the next three years and bottomline CAGR of 29.3% over the same.

At CMP of Rs 555, the stock is currently trading at a forward PE of 15.7x FY08P and 11.9x FY09P. We recommend Buy on the stock for a one year price target of Rs 652 (x 14 FY09P).