Best Power Transmission Stock: Transrail Lighting vs KEC International

The global transmission and distribution (T&D) infrastructure market is set to witness significant investments of over US$ 1 trillion (tn) in the next decade.

A major share of this investment will go towards toward building new transmission lines and substations to support renewable energy projects, as well as enhancing regional grid integration and cross-border connections.

Developed countries will create additional demand by focusing on replacing and upgrading aging grids with the aim of modernising transmission networks.

Both Transrail Lighting and KEC International are well positioned to address this growing demand and varied needs of their global clients.

In this article let's compare these two companies across various parameters to see which one is the better player in the power transmission business.

Business Overview

#Transrail Lighting

Transrail Lighting is an integrated transmission & distribution and pole manufacturing company.

The company's business spans multiple verticals, including power transmission and distribution, and railway electrification.

It is also involved in the construction of infrastructure projects and the manufacturing of street poles and solar street lights.

The company caters to both domestic and international markets. It exports to over 58 countries, including the USA, UAE, Ghana, Poland, Nepal, Indonesia, and Bhutan.

It has four manufacturing facilities in India with a capacity to manufacture 101,000 tonnes per annum (TPA), 60,000 TPA of conductors, and 25,000 TPA of poles.

#KEC International

KEC International is a central global infrastructure engineering procurement and construction (EPC) company.

It has a presence across various verticals, including power transmission and distribution, railways, civil and urban infrastructure, solar, oil & gas pipelines, and cables.

The company has a strong presence in over 110 countries, including India, the Middle East, Africa, South Asia, America, and Central Asia.

It has six tower manufacturing facilities in India and abroad, with a total capacity of 362,200 metric tonnes per annum (MTPA). It also has a cable and solar manufacturing facility with a capacity of 60,000 MTPA.

Particulars	Transrail Lighting	KEC International
Market Cap (in Rs billion)*	84.9	253.3
Order Book (in Rs billion)	101.0	340.9

Source: Equitymaster| * as of 14th January 2025| ** as of financial year 2024

Between the two companies, KEC International has a higher market cap of Rs 253.3 billion (bn) when compared to Transrail Lighting, which has a market cap of Rs 84.9 bn.

Moreover, KEC International also has a high order book of Rs 340.9 bn at the end of September 2024, of which 67% is domestic and 33% is international. Majority of the order book is dominated by transmission and distribution orders, followed by railways, civil, renewables, and cables.

For Transrail Lighting, 39% of the order book is distributed in India, and 61% of the order book is filled with international orders. Within the domestic order book, the majority of the orders are from the transmission and distribution sectors.

In terms of share performance, KEC International shares outperformed the Nifty 50 and gave a return of 60% in the last year, against 7% of the Nifty 50.

The shares of Transrail Lighting were listed on 27th December 2024, and gave 37% listing gains from the IPO price. Since the listing date, the shares have given an 8% return.

#Revenue

It's important to analyse the sources of revenue and the revenue growth of a company to understand its growth prospects.

For Transrail Lighting, the majority of the revenue is generated from EPC projects (95%) followed by sales of products (5%). Within EPC, the government projects (83%) dominate the revenue followed by non-government projects (17%).

For KEC International, the major revenue contributor is EPC projects in the transmission and distribution sector, followed by civil (20%), cables (10%), and railways (7%).

In terms of revenue growth, Transrail Lighting's revenue grew at a compound annual growth rate (CAGR) of 16.7% in the last five years, driven by healthy growth in the order book and a geographically diversified order book.

For KEC International, the revenue grew at a CAGR of 10.7%, driven by a diversified order book and a diversified geographical footprint.

Revenue

Net Sales (in Rs m)	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024	5-Year CAGR
Transrail Lighting	18,806	21,855	23,500	31,522	40,765	16.7%
KEC International	119,654	131,142	137,423	172,817	199,142	10.7%

Source: Equitymaster

#Profitability

To evaluate profitability, it is important to assess earnings before interest tax depreciation and amortization (EBITDA), net profit growth, and profit margins. Growing profits and margins are considered a good sign for the business.

In the last five years, the EBITDA and net profit of Transrail Lighting grew at a CAGR of 15.4% and 17.8%, respectively, due to the strong order book and timely execution of orders. The EBITDA and net margin also averaged 12.8% and 4%, respectively.

For KEC International, the EBITDA grew at a CAGR of 1%, and the net profit saw a degrowth of 9.3% in the last five years. In the last year, the net profit almost doubled due to strong order inflow and healthy order execution. The EBITDA and net margin also averaged 6.7% and 1.7%, respectively, in the last five years.

Clearly, Transrail Lighting is leading with respect to profitability. However, given that both the companies are EPC companies, it is important to monitor order execution, and timely receipt of payments from their customers.

Profitability

EBITDA (in Rs m)	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024	5-Year CAGR
Transrail Lighting	2,996	3,035	2,671	3,819	6,124	15.4%
KEC International	13,406	12,689	10,135	9,782	14,084	1.0%
PAT (in Rs m)	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024	5-Year CAGR
Transrail Lighting	1,030	982	647	1,076	2,332	17.8%
KEC International	5,655	5,527	3,321	1,760	3,468	-9.3%
Gross Profit Margin	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024
Transrail Lighting	15.9%	13.9%	11.4%	12.1%	15.0%
KEC International	11.2%	9.7%	7.4%	5.7%	7.1%
Net Profit Margin	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024
Transrail Lighting	5.5%	4.5%	2.8%	3.4%	5.7%
KEC International	4.7%	4.2%	2.4%	1.0%	1.7%

Source: Equitymaster

#Debt Management

It is important to monitor the debt levels of a company. This is because they are fixed financial obligations that a company has to pay irrespective of the profit levels.

High debt levels are considered a red flag by many investors.

The debt-to-equity ratio of Transrail Lighting and KEC International is 0.1.

Transrail Lighting has an annual debt obligation of around Rs 450 million (m) in 2025 and around Rs 550 m in 2026. This debt was used to fund its capex and expand capacity at its manufacturing facilities.

The company has sufficient cash flows to meet its debt obligations. Moreover, the company has recently completed its IPO of Rs 4 bn, which will also aid in its capex and reduce its dependence on debt.

KEC International has a repayment obligation of Rs 2.9 bn in FY25 and Rs 0.55 bn in FY26. The company has sufficient cashflows to fund this debt obligation.

It has a planned capex of Rs 3.6 bn in FY25 which is likely to be funded by debt.

The capex is to expand its product portfolio at its Vadodara manufacturing facility. It is also expanding the capacity at their Dubai facility for a capex of Rs 100 m. It has also recently added EV charging cables and green cables to its portfolio.

Both companies are investing heavily in capex. However, it is important to keep an eye on the debt levels. Rising debt levels, with low liquidity could be a red flag.

Debt Management

Debt to Equity Ratio (x)	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024
Transrail Lighting	0.3	0.2	0.2	0.2	0.1
KEC International	0.1	0.1	0.1	0.1	0.1

Source: Equitymaster

#Financial Efficiency

The two ratios that help in assessing the financial efficiency of a company are return on capital employed (RoCE) and return on equity (RoE).

The 5-year average RoCE and RoE for Transrail Lighting are 40.1% and 17% respectively. On the other hand, KEC International's RoCE and RoE averaged 27.8% and 11.8%, respectively, in the last 5 years.

Strong growth in revenue and profits has helped Transrail Lighting to consistently grow its return ratios in the last five years.

For KEC International, the return ratios fell when compared to five years ago on account of falling profits.

Clearly, Transrail Lighting is leading in terms of financial efficiency.

Financial Efficiency

ROCE	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024
Transrail Lighting	46.9%	40.4%	29.3%	37.8%	46.3%
KEC International	40.4%	31.2%	20.2%	19.2%	28.1%
ROE	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024
Transrail Lighting	23.5%	17.3%	9.8%	13.9%	20.5%
KEC International	20.2%	16.5%	9.2%	4.7%	8.5%

Source: Equitymaster

#Dividend

A company shares its profits in the form of dividends with its shareholders. A company paying consistent dividends indicates it has stable profits.

In the last five years, the dividend of KEC International has grown at a CAGR of 3.4%. The dividend payout ratio and dividend yield averaged 36.7% and 0.65%, respectively.

Despite falling profits, KEC International has maintained its dividends for the last five years.

Transrail Lighting's shares have listed on the stock market in December 2024. The company has not paid any dividends yet. However, there is a possibility that it might pay dividend in the future.

Dividend

Dividend Per Share (Rs)	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024	5-Year CAGR
Transrail Lighting	0.0	0.0	0.0	0.0	0.0	NM
KEC International	3.3	3.9	3.9	2.9	3.9	3.3%
Dividend Yield	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024
Transrail Lighting	0.0%	0.0%	0.0%	0.0%	0.0%
KEC International	1.8%	1.0%	1.1%	0.7%	0.6%
Dividend Payout Ratio	Mar -2020	Mar -2021	Mar -2022	Mar -2023	Mar -2024
Transrail Lighting	0.0%	0.0%	0.0%	0.0%	0.0%
KEC International	15.5%	18.6%	31.0%	43.8%	29.7%

Source: Equitymaster

#Valuation

A company's valuation can be assessed through the price-to-earnings (PE) ratio and price-to-book value (PB) ratio.

These ratios help us estimate the intrinsic value of a company. They also help us analyse whether a company's shares are overvalued or undervalued when compared to its peers.

The PE and PB ratios of KEC International are 60 and 4.9, respectively. The ratios are slightly lower than their three-year average.

For Transrail Lighting, the PE and PB ratios are 39.5 and 4.3, respectively.

Compared to the industry average, both the company's shares are slightly overvalued.

Valuations	Transrail Lighting	3-Year Average	KEC International	3-Year Average
PE (x)	39.5	NA	60.0	62.4
PB (x)	4.3	NA	4.9	4.6

Source: Equitymaster

#Which Power Transmission Stock is Better: Transrail Lightings or KEC International?

In terms of revenue growth, profit growth, profit margins, financial efficiency, and valuations Transrail Lighting is leading.

However, in terms of absolute revenue and dividends, KEC International is ahead.

KEC International is one of the leading providers of end-to-end turnkey services for transmission and distribution, railways, and solar power projects in India.

With a long-standing presence in the industry, it has an established client base across various industries that helps secure orders.

To leverage this, it plans to expand its capabilities to cater to a broader audience. It plans to invest Rs 3.6 bn in capex in 2025 to expand its product portfolio at its Vadodara manufacturing facility.

The company is also expanding the capacity at their Dubai facility for a capex of Rs 100 m. It has also recently added EV charging cables and green cables to its portfolio.

This shows the company's commitment to growing its revenue and profits in the medium term.

Transrail Lighting, on the other hand, is a small-scale EPC company but has a presence across transmission and distribution, railways, civil, and oil and gas industries.

Compared to its peers, it has a very low revenue base, which indicates a high scope of growth.

It plans to invest around Rs 450 m in capex in 2025 and Rs 550 m in capex in 2026 to expand its manufacturing capacity at its existing facilities to cater to a broader audience.

Overall, both companies are investing heavily in capex to cater to the growing needs of their customers. Given the growing energy needs, the needs for transmission and distribution projects in the world are high, and both the companies are well-established to benefit from it.

However, it is important to do thorough research before jumping into any financial decision.

Investors should also consider corporate governance as one of the criteria for due diligence before considering an investment.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.