Broker's Call: Kalpataru Power (Buy)

| Updated on May 22, 2020 Published on May 22, 2020

Anand Rathi

Kalpataru Power (Buy)

CMP: ₹191.65

Target: ₹344

Covid-19 impacted Q4 FY20 revenues, down 7.6 per cent y-o-y to ₹2,300 crore (in line with our expectation). The gross margin expanded 770 bps y-o-y to 60 per cent, neutralised by higher other expenses, which rose to 43.1 per cent from 36.5 per cent of sales. EBITDA margin expanded 30 bps y-o-y to 11 per cent (our estimate: 10.8 per cent). Interest cost rose 45 per cent y-o-y to ₹46 crore, in line with the increase in debt. PBT fell 15 per cent y-o-y to ₹190 crore. (our est: ₹180 crore). PAT at ₹110 crore came 21 per cent y-o-y lower (our est: ₹130 crore). The major deviation stemmed from the higher tax rate (42 per cent; our est: 28 per cent) against 37.3 per cent a year ago.

Q4 FY20 and FY20 order inflows were down 73 per cent and 6 per cent y-o-y, respectively. For FY21, order inflows are likely to be ₹10,000-11,000 crore (70 per cent international). The company has already received orders of ₹900 crore and is now L1 for orders of ₹2,000 crore, mainly overseas T&D. Management expects 10 per cent growth in FY21, with a 10.5 per cent to 11 per cent margin due to its existing order backlog.

Valuation: We retain our ‘Buy’ rating on the stock, with a sum-of-parts-based higher TP of ₹344 (assigning P/E multiple of 10x to the core earnings). Good revenue assurance (on the robust order book) and earnings growth lead us to maintain our ‘Buy’ recommendation.

Risk: Slowdown in inflows.

Published on May 22, 2020

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