Jyoti Structures Vs KEC Int. - I - Views on News from Equitymaster

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Jyoti Structures Vs KEC Int. - I

Sep 11, 2008

The transmission line segment plays a significant role in power transmission and distribution. In India, the transmission line segment is dominated by four players - Jyoti Structures, KEC International, Kalpataru Power Transmission and L&T. In this series of articles, we will compare different parameters of two of these players, Jyoti Structures and KEC International.

A brief about the companies
Jyoti Structures Limited (JSL) is one of India's largest power transmission and distribution company providing EPC (engineering, procurement and construction) services such as designing, engineering, manufacturing, tower testing, construction to project management of transmission towers, sub-stations and rural electrification. Having executed projects in South East Asia, Middle East, Australia, the Americas and Africa, JSL has considerable amount of global presence and experience. The company has executed projects in over 36 countries.

Part of the RPG group, KEC International (KEC), which has a similar business as of JSL, is a larger version of the JSL. The company earns a major portion of its revenues from international markets. In FY08, KEC earned nearly two-thirds of its revenues from international clients. During the last fiscal, the company merged the domestic focused RPG Transmission and NITEL with it self. While the former is also present in the transmission business along with taking up railway projects, the latter is involved in setting up of telecom infrastructure.

Let us have a look at the different parameters of the two companies.

Markets
In FY08, JSL earns nearly 75% of the revenues from domestic markets, while KEC earns nearly two thirds of its revenues from the international markets. KEC has a strong presence in regions such as Africa, the Middle East and the South Asian markets. The company has also executed projects in the Americas. While on the other hand, JSL also has a certain amount of presence in these regions, its focus largely lies on the domestic markets.

It should be noted that KEC earned nearly 90% of its revenues from the international markets in FY05, which has now come down to around 66%. Due to the strong opportunities available in the domestic space, the company increased its focus towards the same. As such the share of revenues from the domestic market has shifted to approximately one-third of the total revenues in the last fiscal. The company expects the revenue mix to be at similar levels going forward.

Order backlog
As of March 2008, KEC had an order backlog of Rs 42 bn, which was nearly 1.6 times its FY08 income. On the other hand, JSL had an order backlog of Rs 31.2 bn at the end of FY08. Although, it is lower as compared to KEC's order backlog, in terms of order book to sales, it scores over its peer. At the end of FY08, its order backlog to sales ratio was 2.3 times.

Order backlog and sales over the past few years

The Indian power sector has literally electrified post the 2003 period. With strong investments flowing in, the companies present in the domestic segments have benefited to a large extent. JSL being largely focused on the domestic segment, the company has grown its numbers at a much faster pace than that of KEC. To put things in perspective, during the period from FY04 to FY08, JSL's revenues and profits grew by 46% and 100% respectively, while KEC's revenues grew by 37% and 62% respectively, during the same period.

In the next article, we will compare the financials of these two companies over the past few years.


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