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Reliance Securities
KPTL (Buy)
CMP: ₹445.3
Target: ₹544
Kalpataru Power Transmission Ltd is a diversified EPC (engineering, procurement, construction) player involved in execution of power transmission and pipeline projects. It also undertakes buildings, roads and power plant construction projects through its subsidiary JMC Projects.
Kalpataru Power Transmission’s standalone order book stood at ₹14,200 crore as of 3Q FY19 end; order inflow in 9M FY19 stood at ₹6,500 crore with L1 in excess of ₹1,800 crore.
Kalpataru Power Transmission has delivered a strong performance in 3QFY19 led by better-than-expected execution in railway, oil & gas pipeline and T&D business.
At subsidiary level, JMC’s revenue continue to grow owing to improved project execution also Shree Shubham Logistics reported strong growth in revenue.
Looking ahead, we expect KPTL to be one of the key beneficiaries of strong transmission capex in both domestic and global markets, which would drive 21 per cent CAGR in earnings through FY18-20E. Valuing its standalone business at ₹459 (14x of FY21E standalone earnings), JMC at ₹39 (10x FY21E earnings) and SSL at 50 per cent discount to potential valuation at ₹10/share, we maintain our ‘buy’ recommendation on the stock with an unrevised target price of ₹544.
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