Buy Kalpataru Projects Ltd for the Target Rs 1,550 by Emkay Global Financial Services Ltd
We maintain our constructive view on KPIL with BUY, while revising up our TP by ~7% to Rs1,550 from Rs1,450. We believe the company is on a firm footing, given
1) A robust order book of Rs655bn + L1 position of Rs32bn providing 3x revenue visibility
2) Consistent improvement in profitability with a select bidding approach, improving efficiency via enhancing in-house design, and engineering capability
3) A strengthening balance sheet following the successful monetization of non-core assets, with FY26 net D/E expected at ~0.1x, interest as cost-to-sales declining to ~1.6%, and further improvement in the working capital cycle to 90 days vs 94 days in Q4FY25. Q4 performance was broadly in-line, on revenue growth and order inflows, while profitability exceeded expectations. EBITDA margin expanded by 120bps YoY to 9.6%, reflecting better execution and operating leverage. The management guided to order inflow of Rs300bn, 15% revenue growth, and 70bps PBT margin expansion for FY27. Key segments set to drive growth are T&D, B&F, Oil & Gas, and Urban Infra, providing a well-diversified business mix that would support strong execution momentum while sustaining profitability, in our view.
Q4FY26 results summary
KPIL’s revenue for Q4FY2 grew 12% YoY to Rs69.6bn due to robust execution and strong opening order book. Key segments—B&F (up 24% YoY), Oil & Gas (up 48% YoY), Urban Infra (up 24% YoY)—led to growth in revenue. However, revenue growth for the T&D segment was flat YoY on account of supply-chain challenges. EBITDA margin expanded by 120bps YoY to 9.6%, reflecting better execution and operating leverage. Absolute EBITDA grew 28% YoY to Rs6.7bn. Interest cost as a % of sales improved to 1.3% (its lowest ever), and the number of NWC days improved to 90 despite delay in payments from the water business. Overall, adjusted PAT grew 54% YoY to Rs4.2bn.
Growth momentum remains strong
KPIL’s FY26 order inflow stood at Rs264bn (up 4% YoY), in line with its initial guidance for the year. We believe growth momentum would be led by T&D (both Domestic and International), B&F (led by residential/commercial real estate and data center), Urban Infra (strong government push for infra development, ie metros/tunnelling), and Oil and Gas (high investment focus on energy infrastructure in the Middle East). For FY27, KPIL has guided for order inflow of Rs300bn. Order backlog remains healthy at Rs655bn (BB ratio: 3x) and it holds L1 position of Rs3.2bn.
We maintain BUY on KPIL
We remain positive on KPIL in the long run, owing to the company’s focus on securing large high-margin orders (50% of the orders booked in FY26 are worth >Rs10bn each), improving execution, maintaining effective working capital control, exiting non-core businesses, and expanding businesses other than T&D and B&F into international markets. The stock is trading at P/E of 18x/15x on FY27/28E core EPS. We maintain BUY on the stock while raising our TP by ~7% to Rs1,550 (19x FY28 EPS).
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
