KEC profit drops 28.12% as margin slips and stock falls 11.11%
Revenue declined 7.02% year on year, while a higher tax rate and other income equal to 11.68% of pre-tax profit affected earnings quality.
Filed 16 May 2026, 22:54 IST · after market close · KEC International Ltd (KEC)
Key takeaways
- Consolidated net profit fell 28.12% year on year as costs grew faster than revenue and the tax rate rose 3.59 percentage points.
- Operating margin narrowed 0.83 percentage points year on year to 7.01%, leaving KEC 8.65 percentage points below the 15.66% median for 71 reported Industrials peers.
- The stock fell 11.11% on the first trading day after the results, far exceeding its 2.03% median move after the previous eight results.
Price around the results
Revenue contraction drove the year-on-year profit decline
Consolidated revenue fell 7.02% year on year, while expenses declined only 6.18%; the faster cost reduction was not enough to protect operating profit, which fell 16.84%. Pre-tax profit declined 24.68%, with the 3.59-percentage-point rise in the tax rate further reducing net profit. Sequentially, revenue grew 6.47% and operating profit rose 4.20%, but this was not enough to reverse the year-on-year weakness.
Margin remains below peers despite recovery from Q1
Operating margin narrowed 0.83 percentage points year on year and 0.15 percentage points sequentially because expenses grew 6.65% against revenue growth of 6.47% in Q4. The margin had improved from 6.97% in Q1FY26 to 7.16% in Q3FY26, but slipped to 7.01% in Q4; this is a sequential decline, not a third straight quarterly fall. KEC's margin was 8.65 percentage points below the 15.66% median among 71 Industrials peers that had reported.
Other income and tax rate made reported profit less clean
Other income contributed 11.68% of pre-tax profit, after being negative at Rs -48.55 cr in Q3FY26, so the sequential improvement in pre-tax profit was partly aided by this swing. The tax rate rose to 25.20% from 21.61% a year earlier and 20.30% sequentially, adding to the pressure on net profit. Interest expense was broadly unchanged year on year, down 0.29%, so it was not the main driver of the profit decline.
Management links working-capital pressure to disruptions
Management said delayed Dubai dispatches, volatile steel prices and muted collections in the Water business increased debt and working capital. The company also said Middle East geopolitical unrest and supply-chain and logistics disruptions made the operating environment challenging, especially in Q4. Management said tower manufacturing capacity had been increased by about 15% to over 480,000 MT, and said it expects debt levels to improve by Q2 FY27.
The market reaction was unusually negative for KEC
Filed after market close, the results were followed by an 11.11% fall in the stock on the first trading day, with volume at 3.63 times its reference level; the stock was down 14.43% on the next day. Across the previous eight results, the stock rose after three and fell after five, with a median absolute move of 2.03%, making this reaction much larger than its usual post-results move.
Q4FY26 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q4FY26 | Q3FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹6,390 cr | ₹6,001 cr | +6.47% | -7.02% |
| Other income | ₹30 cr | ₹-49 cr | — | +48.96% |
| Expenses | ₹5,942 cr | ₹5,571 cr | +6.65% | -6.18% |
| Operating profit | ₹448 cr | ₹430 cr | +4.20% | -16.84% |
| Operating margin (%) | 7.01% | 7.16% | — | — |
| Interest | ₹170 cr | ₹171 cr | -0.75% | -0.29% |
| Depreciation | ₹51 cr | ₹50 cr | +0.42% | +8.70% |
| Profit before tax | ₹258 cr | ₹160 cr | +61.15% | -24.68% |
| Tax | ₹65 cr | ₹32 cr | +100.00% | -12.18% |
| Net profit | ₹193 cr | ₹127 cr | +51.26% | -28.12% |
| EPS (₹) | ₹7.24 | ₹4.79 | +51.15% | -28.17% |
Operating margin of 7.01% compares with a Industrials sector median of 15.66% across 71 peers that have reported Q4FY26.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -11.11% | -11.14% |
| Next session | -14.43% | — |
| 5 sessions | -7.47% | -9.12% |
| 15 sessions | -10.85% | — |
| 30 sessions | -4.94% | — |
Volume on the results session was 3.63× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
Guidance & outlook
- The company expects debt levels to improve by Q2 FY27.
Expansion
- The company increased tower manufacturing capacity by about 15% to over 480,000 MT.
New initiatives
- The company onboarded an external consultant to advance Scope 3 inventorisation and its Net Zero Strategy.
Problems & risks
- The company faced a challenging operating environment, especially in Q4.
- Geopolitical unrest in the Middle East is identified as a business headwind.
- Supply-chain and logistics disruptions are affecting the business environment.
- Delayed Dubai dispatches, volatile steel prices and muted water collections increased debt and working capital.
What to watch
- Whether operating margin reverses the 0.83-percentage-point year-on-year decline from 7.01%.
- Whether debt levels improve by Q2 FY27, as management said they expect.
- Whether delayed Dubai dispatches, steel-price volatility and muted Water-business collections continue to affect working capital.