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Kalpataru Power (Buy)
CMP: ₹81.45
Target: ₹111
Kalpataru Power Transmission Ltd (KPTL) has been focusing on the overseas power transmission and distribution markets to reduce its reliance on the domestic markets, where cut-throat competition has taken a toll of margins. It is currently executing turnkey projects in 18 countries including Congo, Ukraine, Bhutan, Zambia and Thailand, and its overseas order book constitutes 55 per cent of the total order book with bulk of the orders from Africa and commonwealth independent states. Domestically, Power Grid continues to be the largest client, forming 20 per cent of the total book, followed by SEBs (State electricity boards) at 10 per cent. KPTL’s infrastructure business would continue to report losses for some more time not least due to execution of low margin orders for railways and pipelines in the next fiscal year. Notwithstanding concerns on economic slowdown, shortfalls in power generation targets and awful state of the construction business of JMC Projects (Kalpataru’s arm), the stock valuation of 0.6x FY14 book value and 7.7x FY15 earnings shifts the odds in favour of value-minded investors.
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