Prabhudas Lilladher is bullish on Kalpataru Power and has recommended accumulate rating on the stock with a target of Rs 106 in its May 20, 2013 research report.
Prabhudas Lilladher`s research report on Kalpataru Power
"Kalpataru Power (KPTL) reported sales of Rs10.3bn, down 3 percent YoY (PLe: Rs11.1bn). Weak execution in both, T&D and Infrastructure, led to decline in sales. Sales in T&D segment were impacted by a new regulation regarding BIA certification of certain steel which led to the delay in execution. EBITDA margins improved 90bps YoY to 9.7 percent (PLe: 10 percent) despite infrastructure segment reporting EBIT loss mainly on account of T&D margin trending back to 10 percent levels from a low base last year (EBIT levels). EBIT loss in infrastructure segment was due to lower sales leading to under-recovery of cost and execution of low margin orders in railway. 31 percent increase in interest cost led to PAT degrowth of 14 percent YoY to Rs486m."
"Order book at the end of Q4FY13 for KPTL stood at Rs68bn, up 12 percent YoY. Standalone order inflow stood at Rs8bn, down 24 percent YoY. The management highlighted that there is some softness in domestic demand in the T&D market due to the lag impact of the generation market slowdown. However, management expects to offset impact of domestic slowdown through increasing presence in international markets. During the year, the company entered five new geographies (Thailand, Uganda, Armenia, Bhutan and Tajikistan). KPTL expects to grow sales by 10-15 percent in FY14 and expects margin in T&D to improve by 100bps (visible consolidation in domestic markets). The company also expects return ration to improve, going forward, due to stake sale in Shubham Logistic to TANO Capital (Rs800m), monetization of Thane and Indore real estate and commissioning of BOOT assets."
"The stock is trading at 6.3X FY14E earnings. We believe that an improving margin profile, return ratios and balance sheet will be the key triggers for the stock. We maintain ‘Accumulate’ rating on the stock," says Prabhudas Lilladher research report.
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