Buy Kalpataru Power, target of Rs 1893: Karvy

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Buy Kalpataru Power, target of Rs 1893: Karvy

Karvy Stock Broking has maintained its buy rating on Kalpataru Power Transmission with a price target of Rs 1893. Karvy expects Kalpataru Power to report a mixed result in Q4 FY08, with likely net sales growth of 35% and 15% degrowth of net profit (YoY).

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Karvy Stock Broking has maintained its buy rating on Kalpataru Power Transmission with a price target of Rs 1893 in its May 15, 2008 research report. "We expect Kalpataru Power to report a mixed result in Q4 FY08, with likely net sales growth of 35% and 15% degrowth of net profit (YoY). In Q3FY08, there was delay in commencement of three transmission line projects due to client related issues like funding clearance, leading to decline in revenue of Kalpataru Power (KPTL). We believe those projects are likely to be cleared in Q4FY08 and based on this, we expect KPTL to report a strong revenue growth of 35% YoY and 100% QoQ to Rs 7047 million, in Q4FY08 on standalone basis. Strong growth on sequential basis is attributable to dismal performance in Q3FY08. However, we expect margin to contract on account of sharp rise in steel prices."

"We estimate equity dilution of 11% as KPTL is planning to raise fund up to USD 125 million. through QIP/ GDR/ FCCB in FY09. Considering this, we estimate post-dilution EPS (standalone) to come down by 1.8% to Rs 100 for FY09. We value the stock at 17x its FY09 earnings to arrive at a standalone valuation of Rs 1700 per share. Also, we value its subsidiary JMC projects (holding 52% stake) at Rs 193 per share, post revision based on 20x FY09 EPS of JMC. Hence on a consolidated basis, we reiterate our BUY rating on KPTL with a price target of Rs 1893 per share," says Karvy's research report.

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