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Steady execution amid pandemic disruptions…

About the stock: Kalpataru Power (KPTL) is among the leading EPC players in key infrastructure sectors such as power T&D, railways, oil & gas pipeline, urban infrastructure, buildings & factories, water, etc.

* Focus on strengthening core EPC business in India and overseas markets

* Strong capabilities across business verticals with growing international presence (60+ countries) contributed ~46% of revenue in FY21.

Q1FY22 Results: KPTL reported steady Q1FY22 results.

* Standalone revenue was up 8.7% YoY, aided by steady execution

* EBITDA came in at | 162 crore, up 3.8% YoY with EBITDA margins at 10.2% with decline of 10 bps QoQ and 50 bps YoY, impacted by higher commodity prices, supply chain disruptions

* Consequently, PAT came in at | 76 crore, up 10.1% YoY

* Order inflows for Q1FY22 came in muted at | 865 crore.

What should investors do?

We believe monetisation of non-core assets to improve balance sheet health and return ratios in the long run.

* We remain long term positive and retain our BUY rating on the stock.

Target Price and Valuation: We value KPTL at | 550 on an SoTP basis

Key triggers for future price performance:

* We expect revenue to grow at ~14.4% CAGR over FY21-23E owing to strong order book worth ~| 13397 crore and L1 orders worth ~| 2550 crore

* Strong order pipeline for 9MFY22E to ensure decent order inflow growth

* Expected cash proceed from monetisation of non-core assets by Q4FY22E, to make balance sheet net debt free at standalone level

Alternate Stock Idea: We also like KEC International in our coverage

* Strategic shift in portfolio from T&D to non-T&D (13% contribution in FY16 increased to 42% in FY21), double-digit return ratios

* BUY with target price of | 485

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