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Beat across all parameters

Kalpataru Projects (KPIL) reported a sharp beat on revenue and PAT during 1QFY26. This was driven by strong execution across T&D, B&F, and the oil & gas division. The company continues to benefit from a strong prospect pipeline in T&D and buildings & factories. We anticipate KPIL to benefit from 1) incremental T&D awarding on both domestic and international fronts, 2) execution ramp-up of the existing strong order book, and 3) comfortable working capital. We marginally raise our estimates by 3%/1% for FY26/27 to bake in the 1QFY26 performance. The stock is currently trading at attractive valuations of 20.7x/15.8x P/E on FY26/27 earnings. Reiterate BUY with an unchanged SoTP-based TP of INR1,450, valued at 18x P/E for the core business.

Strong set of numbers with an all-round beat

KPIL’s 1QFY26 revenue at INR50b (+34% YoY) was 10% above our estimate. Growth was driven by robust project progress and a strong order backlog. T&D/B&F revenue grew 56%/13% YoY, while O&G/Urban Infra revenue jumped 132%/42% YoY. Railways grew moderately by 5% YoY, while the Water segment continued to witness challenges, declining 5% YoY. Absolute EBITDA grew 37% YoY to INR4.3b vs. our estimate of INR3.9b (10% beat), while EBITDA margin was in line with our estimate of 8.5%. Adj. PAT surged 72% YoY to INR2.0b, beating our estimate of INR1.5b by 30%, aided by strong revenue growth and a lower tax rate (26.8% vs. our estimate of 27.7%). Order inflows at INR99b were up 41% YoY, mainly driven by B&F and T&D businesses. The company received its largest-ever order in the B&F business, worth over INR25b, during the quarter. The order book stood at INR644.8b (+13% YoY). NWC days stood at a comfortable level of 106 in 1QFY26 vs. 124 in 1QFY25. Net debt was down YoY at INR19.4b in 1QFY26 (vs. INR29b in 1QFY25).

Segmental performance driven by T&D, B&F, and oil & gas

Segmental performance in 1QFY26 was led by strong growth in the T&D, B&F, and oil & gas segments. On a consolidated basis, T&D revenue surged 56% YoY to INR28.7b, supported by a robust order backlog, healthy execution in both domestic and overseas markets, and new orders worth INR31.9b, taking the order book to INR267.3b. The B&F business maintained its momentum, with consolidated revenue increasing 13% YoY to INR13.8b, and with inflows of INR67.1b (including the company’s largest-ever design-build residential project), the order book grew to INR166b. Oil & Gas revenue more than doubled to INR5.9, led by strong progress on the Saudi Aramco project, with KPIL now qualified with major Middle East utilities and actively bidding for large-scale projects in the region. Collectively, these high-margin products remained the key contributors to growth and profitability during the quarter. Railways grew moderately by 5%, while Water continues to face challenges, declining 5% YoY.

T&D and B&F segments to fuel execution and improve margins

The T&D and B&F segments are poised to remain key growth drivers for KPIL in the coming years, backed by strong order visibility, healthy margins, and strategic positioning in high-potential markets. The T&D business, with an INR267.3b order book (up 30% YoY) and a tender pipeline exceeding INR1.2t over the next 12-18 months, is set to benefit from sustained investments in grid expansion, modernization, and energy transition, both in India and internationally. Recent wins in HVDC projects and deeper penetration in the Middle East and Nordic regions further enhance long-term prospects. The B&F segment, with an all-time high order book of over INR166b, continues to secure large-scale, complex design-build contracts, including a large order received during the quarter for a residential project of over 12 million sq. ft. The business has a strong presence in southern India, works with marquee developers, and is expanding into high-growth areas such as data centers. Both segments deliver high EBITDA margins of 9-10% and are expected to drive not only revenue expansion but also margin accretion, making them key growth drivers for the company. We expect T&D/B&F to clock a revenue CAGR of 18%/19% over FY25-28, with order inflows to post a CAGR of 10%/15% even on a high base.

Water projects’ healthy backlog offset by delays in JJM funding

The water segment reported a 5% YoY revenue decline in 1QFY26, impacted by delayed collections in certain states, particularly Uttar Pradesh and Jharkhand, though improvement was noted in others like Madhya Pradesh and Odisha, where payments are now timely. KPIL is adopting a cautious execution approach, prioritizing projects in states with better payment track records, while continuing work on centrally funded projects where budgets are already allocated. Outstanding receivables under the Jal Jeevan Mission stand at over INR10b as of 30 Jun’25, including billed and unbilled amounts. With an order backlog of INR89b providing 2-2.5 years of revenue visibility, the company expects single-digit growth in FY26, supported by gradual improvement in collections and a selective approach to new orders. However, due to uncertainties in the government allocating funds to the JJM scheme, we expect the water segment to remain under pressure for the next 2-3 years.

Roads and international subsidiary performance

In 1QFY26, toll revenue from the company’s road BOOT assets rose to INR7.3m per day from INR6.4m in the prior year, with no fresh equity infusion into the SPVs during the quarter. WEPL issued a termination notice to NHAI in Jul’25 due to contractual defaults, with management not expecting any material financial impact apart from a possible INR400m debt repayment to avoid NPA classification, which is anticipated to be recovered through claims. The sale of the Vindyachal Expressway remains on track, with approvals expected in 3QFY26 and cash inflows of INR7b-8b, of which roughly half will be used for debt reduction and the remainder for equity inflow to the company. In subsidiaries, Sri Shubham Logistics is pursuing the sale of two to three large warehouses in FY26 to repay debt, while Indore real estate projects are nearly sold out with INR1b collections expected by early 3QFY26. LMG revenue increased 72% YoY to INR7.7b with an EBITDA margin of ~8%. The company is exploring fundraising for this subsidiary (including IPO). Fasttel recorded revenuegrowth but remained loss-making at the EBITDA level, with breakeven targeted from 3QFY26. Management’s outlook for these non-core assets remains focused on monetization, debt reduction, and redeployment of released capital to strengthen the balance sheet and support core business growth.

Financial outlook

We tweak our estimates upwards by 3%/1% each for FY26/27 to bake in 1QFY26 performance. We expect KPIL to report a CAGR of 17%/21%/30% in revenue/EBITDA/PAT over FY25-28. This would be driven by: 1) inflows of INR280b/INR318b/INR366b FY26/FY27/FY28 on a strong prospect pipeline, 2) a gradual recovery in EBITDA margin to 9.3% by FY28, and 3) control over working capital owing to improved customer advances, better debtor collections from water and railways, and claims settlement. Led by improvement in margins and mod

Valuation and view

KPIL is currently trading at 20.7x/15.8x P/E on FY26/27 earnings. Reiterate BUY with an unchanged SoTP-based TP of INR1,450 based on 18x P/E for the core business.

Key risks and concerns

Slowdown in execution, lower-than-expected order inflows, a spike in commodity prices, and an increase in promoter pledge are some of the key concerns that can weigh on financials and valuations of the company.

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