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Anand Rathi
Kalpataru Power Transmission (Buy)
CMP: ₹400
Target: ₹576
Key takeaways: a) The (standalone) order book was ₹14,900 crore (up 5 per cent y-o-y). Domestic T&D plunged 30 per cent, whereas growth in overseas T&D (up 22.4 per cent y-o-y) and infrastructure was strong. The company is now L1 for orders of ₹1,500 crore, mainly overseas T&D. Because of its 15-16 per cent market share, it expects significant inflows from the recently tendered out T&D orders of ₹8,000-9,000 crore. It has retained its FY20 order-inflow guidance (about ₹90,000-1,00,000 crore). Management maintained FY20 revenue growth guidance of 18-20 per cent. We expect revenue to clock a 14 per cent CAGR over FY19-22.
b) Despite its operating leverage, the company expects to sustain margins at FY19 levels due to higher execution in the low-profitable business (railways and pipelines). On the monetisation of three assets, surplus cash would be used to repay debt and reduce interest costs in FY21. We expect earnings to clock a 20 per cent CAGR over FY19-22.
Valuation: We maintain ‘buy’ rating on the stock with SoTP based revised TP of ₹576 (assigning lower P/E multiple of 11x to the core earnings). Despite slowdown in T&D capex, execution has been healthy.
Risk: Slowdown in inflows.
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