Sharekhan Recommends Buy on Kalpataru Projects International with Target Price of Rs 1,570

Sharekhan is optimistic about Kalpataru Projects International Ltd. (KPIL) and has given it a buy rating with a target price of Rs 1,570, according to their research report from October 1, 2024.

• Investment Outlook: Sharekhan expects the company to benefit from increasing orders and divestment opportunities. KPIL’s stock is currently trading at 29x, 21x, and 18x its earnings per share (EPS) for FY2025, FY2026, and FY2027, respectively.
• Strong FY24 Performance: KPIL had a robust performance in FY24, driven by effective execution in their Transmission & Distribution (T&D) business, both domestically and internationally, along with solid results in the Buildings and Factories (B&F) sector. However, the first quarter of FY25 saw weaker results due to labor shortages and upcoming elections.
• Positive Industry Outlook: The revised National Electricity Plan (2023-32) anticipates a total capital expenditure of Rs 9.15 lakh crore, which is favorable for T&D and power sector companies. This plan is expected to stimulate growth in the industry.
• Growth Projections: Sharekhan projects that KPIL will achieve a compound annual growth rate (CAGR) of 19% in revenue and 30% in profit after tax (PAT) from FY24 to FY27, thanks to strong performance in the T&D segment and improved profit margins.

Key Metrics

• Shareholding:
  • Promoters: 35.2%
  • Foreign Institutional Investors (FII): 10.1%
  • Domestic Institutional Investors (DII): 45.6%
  • Others: 9.1%
• Price Performance (1-month, 3-month, 6-month, 12-month):
  • Absolute: 0.1%, 12.2%, 21.0%, 112.0%
  • Relative to Sensex: -2.2%, 6.9%, 7.4%, 84.3%
• Market Details:
  • Market Cap: Rs 21,859 crore
  • 52-week high/low: Rs 1,449/Rs 601
  • NSE Volume: 7.89 lakh shares

Financial Forecast (Rs crore)

Recent Developments

• Order Book and Growth: KPIL currently has an order book of approximately Rs 57,000 crore, with additional orders expected. The company has recently entered the domestic airports sector and plans to divest from certain projects by FY25.
• Electricity Plan Benefits: The new National Electricity Plan is set to expand the transmission network significantly by 2032, which will boost opportunities for companies in the T&D sector.
• Positive Order Inflows: Year-to-date, KPIL has secured orders worth Rs 11,000 crore, representing a 70% increase compared to the previous year. Management anticipates total order inflows of Rs 23,000 crore for FY25.
• Divestment Plans: The company plans to fully divest its Indore project by Q3 FY25. They have also received a non-binding offer for a significant asset, which they expect to monetize soon. The reduction in promoter pledges is seen as a positive sign for potential stock re-rating.

Conclusion

Sharekhan maintains a buy rating on KPIL with a target price of Rs 1,570 due to its solid order book and growth potential. The company’s effective management and strategic focus on T&D, along with the government’s infrastructure spending plans, position it well for future success.

Key Risks

• Project Delays: Any delays in project execution could impact KPIL’s performance. Additionally, the company faces risks from fluctuations in commodity prices, interest rates, and foreign exchange rates.