Buy Kalpataru Projects Ltd for the Target Rs 1,650 by Emkay Global Financial Services Ltd
We assume coverage on Kalpataru Projects International (KPIL) with BUY and TP of Rs1,650, valuing the stock at 19x its Jun-28E EPS. KPIL’s operating performance beat our estimates. Standalone revenue booking stood at Rs54.9bn (+8.8% yoy; Emkay estimate: Rs53.9bn). EBITDA was Rs4.9bn (+13.9% yoy; Emkay: Rs4.6bn), with margin of 8.9% (+40bps yoy; Emkay: 8.5%). The margin expansion reflects a strong operating leverage, improved business mix, and disciplined working capital management, achieved despite early-quarter labor shortages, slower water business receivables, and global supply chain disruptions. YTD order inflow reached ~Rs77bn, with an additional Rs73bn in L1 positions. The company ended 1QFY27 with its highest-ever order book of Rs666bn, providing 2.5 years of revenue visibility. Management reaffirmed its FY27 guidance for at least 15% revenue growth on an annualized basis and unchanged PBT margin improvement of >75bps. The company is on track to achieve its order inflow goal of Rs300bn for FY27, with a potential upward revision to this guidance by the end of 2Q. 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.
Q1FY27 - Beats our estimates
KPIL’s revenue for 1QFY27 grew 8.8% yoy to Rs54.8bn, on the back of robust execution and strong opening order book. Key segments—T&D (up 10% yoy), B&F (up 15% yoy), Oil & Gas (up 18% yoy), Urban Infra (up 15% yoy)—led to growth in revenue. However, there was de-growth in water (-7% yoy) and railways (-23% yoy). EBITDA margin expanded by 40bps yoy to 8.9%, reflecting better execution and improved business mix. Absolute EBITDA grew 14% yoy to Rs4.9bn. Interest cost as a % of sales improved to 1.2% (its lowest ever), and the number of NWC days improved to 94 despite delay in payments in the water business. Overall, adjusted PAT grew 32% yoy to Rs2.7bn.
Growth momentum remains strong
KPIL’s YTD order inflow stood at Rs77bn with an additional L1 position of Rs73bn. Key segments: T&D secured >Rs42bn (+L1 of Rs50bn) and B&F more than Rs28bn (+L1 of Rs22bn). The company is on track to achieve its order inflow goal of Rs300bn for FY27, with a potential upward revision to the guidance by the end of 2Q. Order backlog remains healthy at Rs666bn (BB ratio: 2.5x)
View and valuation
We remain long-term positive on KPIL, owing to its focus on securing large high-margin orders, improving execution, maintaining effective working capital control, exiting noncore businesses, and expanding businesses other than T&D and B&F into international markets. The stock is trading at PER of 16x/14x on FY27/28E EPS. We assume coverage on KPIL with BUY and TP of Rs1,650 (19x Jun-28E EPS).
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