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Healthy margins and reduction in debt

Kalpataru Project (KPIL)’s 1Q result was ahead of our estimates due to better-thanexpected margin performance and higher other income. Order inflows stood healthy at INR77b, though down YoY on a high base, taking the total order book to INR666b, up 2% YoY. The ordering pipeline continues to remain strong for KPIL across T&D, B&F, and O&G segments, which can support order inflow growth for the company. KPIL has already hived off most of the non-core assets and also reduced overall borrowings. We expect KPIL’s execution growth momentum to pick up in the coming quarters, and with strong margins and healthy leverage, we expect its PAT growth to remain healthy too. We tweak our estimates by +6%/2% for FY27/28 to model better margin performance and expect its revenue/EBITDA/PAT to clock a CAGR of 14%/14%/18% over FY26-29. Reiterate BUY with a TP of INR1,600, valuing the core business at 18x Sep’28E EPS.

In-line revenue, beat on profitability

KPIL reported in-line revenue, while EBITDA and PAT were above our estimates. Revenue at INR54.8b (+9% YoY) was broadly in line. Growth was driven by strong execution across key segments, barring water and railways. Gross margin expanded 240bp YoY to 25.6%, 210bp ahead of our estimate of 23.5%. Absolute EBITDA grew 14% YoY to INR4.9b, 8% ahead of our estimate, while EBITDA margin expanded 40bp YoY to 8.9% (above our estimate of 8.5%) on the back of a diversified business mix and efficient working capital management. PAT increased 32% YoY to INR2.7b, vs. our est. of INR1.9b. Better-than-expected margins, higher other income, and a lower tax rate led to a beat on our PAT estimate by 38%. The 1QFY27 order inflow stood at INR77b, leading to an order book at INR666b (+2% YoY). NWC days were comfortable at 94 in 1QFY27 vs. 106 in 1QFY26. Net debt more than halved to INR7.5b in 1QFY27 vs. INR19.4b last year.

T&D prospects remain strong across domestic and export markets

T&D segments’ LFL (excluding Fasttel) revenue grew 10% YoY during the quarter. The segment secured more than INR42b of orders YTD and is L1 in projects worth more than INR50b, with increasing exposure to HVDC and GIS. The domestic opportunity remains strong, with the annual addressable market estimated at INR1.0-1.25t for the next five years, including 1-2 HVDC projects annually, driven by transmission expansion and renewable-energy evacuation. Internationally, grid-capacity constraints across Europe, the Middle East, and parts of South America provide additional growth opportunities. We expect T&D to remain one of the key contributors to growth, supported by strong tendering activity and KPIL’s positioning in high-value projects. We expect the T&D segment to clock a revenue CAGR of 12% over FY26-29, led by an order inflow CAGR of 15% over the same period.

B&F and O&G provide visibility beyond T&D

B&F maintained strong momentum, with revenue growing 15% YoY to INR16.9b, while order inflows exceeded INR28b YTD and L1 positions stood at ~INR22b, taking the order book above INR196b. Demand remains broad-based across residential, commercial offices, data centers, airports, and industrial projects, with PSU and private sector industrial capex providing additional pipeline visibility. O&G revenue increased 18% YoY. Execution in Saudi Arabia is progressing well, while the Middle East remains the primary opportunity over the next 1-2 years. KPIL has bid for large projects across Saudi Arabia, the UAE, Qatar, and Kuwait, with individual bids ranging from USD100m to USD500m. Several of these orders are expected to be awarded over the next 3-6 months. We expect B&F and O&G to remain key growth drivers beyond T&D, supported by a strong B&F order book and increasing traction in large Middle East O&G projects.

Financial outlook and view

We revise our estimates by 6%/2% for FY27/FY28E to bake in better margin performance and expect revenue/EBITDA/PAT to grow at a CAGR of 14%/14%/18% over FY26-29. The stock is trading at 19.4x/16.6x/14.1x P/E on FY27/28/29 earnings. Reiterate BUY with an unchanged TP of INR1,600, valuing the core business at 18x Sep’28E EPS.

Key risks and concerns

A slowdown in execution, lower-than-expected order inflows, a sharp rise in commodity prices, and an increase in promoter pledges are some of the key concerns that can weigh on the financials and valuations of the company.

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