Accumulate Kalpataru Projects International Ltd for the Target Rs 1,554 by Prabhudas Liladhar Ltd
Healthy Q2; Order prospects remain strong
Kalpataru Projects International (KPIL) reported a strong operating performance in Q2FY27, supported by robust order inflows, healthy execution and improving profitability. YTD order inflows surged ~60% YoY to ~INR240bn, with an additional ~INR50bn of projects where the company is favorably placed, prompting management to upgrade FY27 order inflow guidance to INR350-360bn from INR300bn. The order book stood at a INR718.5bn, providing healthy growth visibility, while FY27 revenue growth guidance of ~15% was reiterated. T&D, B&F and Oil & Gas remain key growth engines, supported by a robust transmission pipeline, strong traction in residential and industrial EPC, and international gas infrastructure opportunities. The water business is witnessing improving collections, with ~INR11bn collected in H1FY27 and ~INR15bn outstanding receivables, largely related to JJM; management expects collections to improve further over the next six months, while the Middle East offers a meaningful avenue for international expansion. Management expects to sustain or improve margins in H2FY27, aided by variable-priced contracts (~50% of the order book), client reimbursement of geopolitical cost escalations and operational efficiencies. KPIL’s balance sheet strengthened materially, with net debt declining to ~INR720mn and working capital days improving to 68 days. A strong order pipeline, improving profitability and a near debt-free balance sheet position KPIL well to sustain growth, while Middle East execution and water receivables remain key monitorable. The stock is trading at a P/E of 15.6x/12.8x on FY28/29E. We roll forward to Sep’28E and maintain our ‘Accumulate’ rating valuing the core business at a PE of 15.5x Sep’28E (16x Mar’28E earlier) arriving at a SoTP derived TP of INR1,544 (earlier TP of INR 1,472).
Long-term view: We remain positive on KPIL in the long run owing to
1) strong order pipeline across segments
2) focus on geographical expansion across Middle East, LATAM and Europe
3) increasing pre-qualification for large contracts
4) Improving balance sheet and backward integration supporting sustainable growth
Healthy execution; broadly in-line with our estimates:
Standalone revenue grew by 14.7% YoY to INR62.1bn (PLe: INR61.5bn) driven by strong performance in O&G (+58.1% YoY to INR8.8bn), B&F (+19.6% YoY to INR20.3bn) and Standalone T&D (+12.7% YoY to INR24.3bn). EBITDA increased by 17% YoY to INR5.2bn (PLe: Rs5.3bn) while EBITDA margin expanded by 17bps YoY to 8.4% (Ple: 8.6%) aided by lower employee expenses (- 38bps YoY as % of sales). Adj. PBT rose by 34.8% YoY to INR3.7bn (Ple: INR3.5bn) aided by higher other income (+46% YoY to INR354mn) and lower interest cost (-22% YoY to INR805mn). Adj. PAT increased by 34.6% YoY to INR2.7bn (Ple: INR2.6bn) aided by a strong operational performance and a flattish YoY effective tax rate of 26.7%
Strong order book of INR718.5bn (2.9x TTM revenue):
Order inflow decreased by 222% YoY to INR162.7bn with T&D order intake stood at INR59.6bn, O&G order intake stood at INR51.2bn and B&F order intake stood at 51.9bn in Q2FY27. Order book stands at INR718.5bn (2.9x TTM sales) with domestic/export mix of 59%/41% (vs 63%/37% in Q2FY26).
Please refer disclaimer at Report
SEBI Registration number is INH000000933
