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Execution ramp up propels strong Q2 growth

Quick Pointers:

* Management upward revised its revenue growth guidance from 20-25% to 25%+ with PBT margins improving by 50bps+ in FY26.

* Strong revenue growth was driven by robust execution across T&D and B&F while Water projects continue struggle from slower collections.

Kalpataru Projects International (KPIL) reported strong 31.0% YoY revenue growth, driven by robust execution across T&D and B&F, though EBITDA margin contracted slightly by 17bps due to project mix and slower water execution. Backed by sustained momentum in T&D, management raised its FY26 revenue growth guidance to 25%+. The company’s proven capability in executing large civil projects continues to open new growth avenues in B&F, while steady ramp-up of the Saudi Aramco project is supporting O&G performance. However, persistent collection delays in the Water segment (outstanding collections of Rs15.5bn) remain a drag while company focuses on closure of existing railway projects. Management expects order inflows of Rs250bn+ in FY26, backed by a sharp expansion in the T&D tendering pipeline from ~Rs1.2trn to ~Rs1.5trn across domestic and international markets, reinforcing strong multi-year revenue visibility. The stock is trading at a P/E of 17.6x/14.7x on FY27/28E core-EPS. We roll forward to Sep’27E and upgrade our rating from ‘Accumulate’ to ‘Buy’ given the expansion in the T&D tendering pipeline in domestic and international markets. We value the core business at a PE of 18x on Sep’27E (18x Mar’27E earlier) arriving at a revised SoTP-based TP of Rs1,494 (Rs1,366 earlier). Upgrade to ‘Buy’.

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 for segments such as Water, Railways and Civil, 3) increasing pre-qualification for large contracts, and 4) operational & cost synergies arising from the merger with JMC.

Healthy execution across T&D and B&F leads to strong growth: Standalone revenue grew by 31.0% YoY to Rs54.2bn (PLe: Rs51.3bn) primarily due to strong execution across businesses except water projects. Gross margin improved by 273bps YoY to 24.1%. EBITDA increased by 28.3% YoY to Rs4.5bn (PLe: Rs4.4bn) while EBITDA margin remained flattish YoY at 8.3% driven by higher gross margin offset by higher other expenses (+92.0% YoY to Rs4.0bn). PBT rose by 48.3% YoY to Rs2.7bn (PLe: Rs2.7bn) driven by better operational performance. PAT increased by 51.1% YoY to Rs2.0bn (Ple: Rs2.0bn) aided by lower effective tax rate (-135bps YoY to 26.6%).

Strong order book of Rs646.8bn (3.0x TTM revenue): Quarterly order intake declined by 41.8% YoY (against higher base) to Rs50.5bn. T&D order intake stood at Rs36.8bn, while B&F order intake stood at Rs13.8bn. Domestic/Export mix of order intake stood at 71%/29% (vs 65%/35% YoY). Order book stands at Rs646.8bn (3.0x TTM sales) with domestic/export mix of 63%/37% (vs 54%/46% YoY).

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