Kalpataru Projects International Ltd. share price target

Aided by strong execution, Kalpataru Power Transmission (KPP) sustained its growth momentum in 3QFY20 as well with its revenue growing by 15% YoY to Rs19.8bn vs. our estimate of Rs20.2bn. T&D; revenue increased by 5% YoY, while non-T&D; grew by 20% (Railway business up 2x). EBITDA margin fell by 20bps YoY to 10.5%, while blended EBITDA grew by 13% YoY to Rs2.1bn. Despite strong EBITDA growth, higher interest (+35% YoY) and higher depreciation (+22% YoY) capped the PBT at Rs1.5bn (+9% YoY). Aided by lower taxes, adjusted PAT grew by 23% YoY to Rs1.13bn, while reported PAT grew by 49% YoY to Rs1.37bn, as KPP sold its stake in Kalpataru Satpura (Rs240mn). While KPP's order book rose by 5% YoY to Rs149bn, YTD order inflows remain...

Whilst 3QFY20 Rev was inline interest cost resulted in 14% APAT miss. Tepid order inflows and slowing growth in T&D and Railways segment on high base will result in sub 10% FY21E Rev Growth. Tailwinds like consolidated debt free status by FY21E will cushion any further de-rating. We maintain BUY. EPS cut factors in slower than expected order intake and muted ordering environment. Key risks (1) Delays in capex recovery, (2) Slowdown in government infrastructure spend, (3) Delay in Road BOTs monetization and (3) NWC deterioration. We maintain BUY on Kalpataru Power Transmission Ltd. (KPTL) with reduced SoTP of Rs 644/sh (core 15x FY21EPS). The Company is expected to achieve 18-20% revenue growth during FY20E. We have cut FY20/21E EPS by 0.7/4.1% to factor in tepid inflows. Tailwinds like significant BS deleveraging by FY21/22E will lead to further re-rating.

Non-T&D; segments continue to post strong performance For Q3FY20, revenue for T&D; came in at | 1209 crore, up 6%, while nonT&D; (railways- | 450 crore, oil & gas - | 320 crore) segment grew 30%+ to | 770 crore on a low base. The management is confident of achieving minimum 18-20% revenue growth and order inflow guidance of | 8500-9500 crore for FY20E. The T&D; business is expected to grow 9-10% in FY20E while non-T&D; (railways & pipeline) is expected to grow 30%+ owing to strong execution traction. The EBITDA margin for T&D; is expected in the range of 11.5-12% while railways and oil & gas are expected to have margins...

execution across the segments viz. T&D;, Oil & Gas Pipeline and Railways segments. YTD order inflow stands at Rs65bn majorly contributed by T&D; business and is further L1 in orders worth Rs15bn. Management is confident of achieving revenue growth of 18-20% with EBITDA margins of 10.5-11% for FY20E. Management has guided for order inflow to be around Rs90-100bn led by opportunities in T&D; (Green Energy Corridor projects in domestic market and international projects) and Infra sector. Approval process for transfer of Transmission Assets to CLP is progressing well and are as per planned...

Kalpataru reported a strong set of performance for Q2FY20 by growing at 25.0 percent YoY backed by strong performance from T&D; business and Railway business.

KPTL has taken strategic steps towards BS deleveraging. Well diversified sector/geographical presence is yielding high growth. NWC is stable. With 2HFY20 likely to see strong T&D/Railways order bidding, KPTL is well set to exceed Rs 90-100bn of order inflow guidance. Road Assets monetization talks are nearing finalization. Restructuring/ refinancing of two Roads BOTs will bring down cash burn significantly. Key risks (1) Delays in capex recovery, (2) Slowdown in government infrastructure spend, (3) Delay in Road BOTs monetization and (3) NWC deterioration. We recommend a BUY on Kalpataru Power Transmission Ltd. (KPTL) with SoTP of Rs 675/sh (core 15x FY21EPS). The Company has upped its FY20E revenue growth guidance from 15-20% to 20%. Tailwinds like significant BS deleveraging by FY21/22E will lead to further re-rating.

Non-T&D; segments continue to post strong performance For Q2FY20, revenue for T&D; grew 16% to ~| 1300 crore, railway segment grew 100% to | 400 crore amid a low base while pipeline business remained flattish at ~| 300 crore. T&D; business revenue consists of T&D; domestic (55%) and T&D; international (45%). The management is confident of achieving minimum 20% revenue growth and order inflow guidance of | 9000-10000 crore for FY20E. The T&D; business is expected to grow 1012% in FY20 while non-T&D; (railways & pipeline) is expected to grow 35%40% owing to strong execution traction. The EBITDA margin for T&D; is expected in the range of 11.5-12% while margins in railways and oil & gas...

Order inflow up 22% YoY at Rs24.9 bn, mainly driven T&D; business. YTD order inflow stands at Rs49.4 bn (FY20 guidance of Rs100 bn). L1 of position of ~Rs20 bn, mainly T&D; business. Kalpataru Power Transmission Ltd (KPTL) reported strong set of numbers for...

Valuation - Maintain Buy with unchanged PT of Rs. 590: KPTL has shown strong execution with 25% y-o-y standalone revenue growth for H1FY2020, led by better-than-expected growth in T&D; and doubling revenue from railways. Going ahead, its T&D; is expected to grow at 10-12% y-o-y, while railways and oil and gas are expected to grow at a higher pace. Further, order visibility remains healthy in domestic T&D;, neighboring countries (Bangladesh and Sri Lanka), Nordic region and African countries. We have upwardly revised our estimates for FY2020-FY2021, factoring strong...

Kalpataru reported a strong set of performance for Q1FY20 by growing at 24.9% YoY upon faster execution of projects. Revenue was mainly driven by oil & gas and the railways order execution. EBITDA grew by 22% YoY and profit after tax (PAT) had grown by 13.5% YoY.