Buy Kalpataru Projects International Ltd for the Target Rs. 1,466 By Prabhudas Lilladher Ltd
Middle East impact limited; Strong T&D outlook
Quick Pointers
* Middle East exposure remains ~10-11% of the total order book (INR633bn)
* Management has guided for ~20%+ revenue growth in long term, with PBT margin likely to improve by 50-70 bps in FY27
We interacted with the management of Kalpataru Projects International (KPIL), wherein it highlighted a resilient growth outlook driven by a strong T&D pipeline across geographies, with international markets expected to outpace domestic supported by better margins and payment cycles. While Middle East exposure remains limited (10–11% of order book), near-term execution may see minor slippages (~INR2bn) due to geopolitical disruptions. Medium-term opportunities, however, remain intact. The B&F segment continues to see strong traction led by data centers and core infrastructure, with sustained double-digit growth visibility, while the O&G business is witnessing improving traction in international markets with ~$1bn opportunity pipeline over the next 2 years. The Railways segment remains weak with limited incremental opportunities, prompting selective participation, while the Water segment is expected to gradually improve driven by better collections under JJM 2.0. The Urban Infra business remains in a scale-up phase, with revenue expected to reach ~INR70bn by FY29, although current contribution to profitability remains limited due to higher capex and ramp-up costs.
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.
The stock is trading at P/E of 15.4x/12.4x on FY27/28E core-EPS. We roll forward to Mar’28 and maintain our ‘BUY’ rating valuing the core business at P/E of 16x Mar’28E (18x Sep’27E earlier), arriving at revised SoTP-derived TP of INR1,466 (Rs1,489 as earlier), factoring in a cautious stance on KPIL’s Middle East exposure.
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SEBI Registration number is INH000000933
