Buy Kalpataru Power Transmission Ltd For Target Rs.550 - ICICI Direct
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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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