Buy Kalpataru Projects; target of Rs 1200: Motilal Oswal

Motilal Oswal's research report on Kalpataru Projects

Kalpataru Projects (KPIL) reported a broadly in-line revenue growth of 16% YoY, while its EBITDA/PAT grew 17%/9% YoY. PAT was hit by higher-than-expected interest expenses, as the collections from Water projects continued to be delayed. The company continues to maintain a 20-25% market share in the T&D opportunity
pipeline while it is affected in the near term by delayed payments on the water segment. We expect its T&D, buildings & factories, and oil & gas segments to drive growth going forward. Benign commodity prices provide comfort on margin expansion, and interest expenses are likely to come down after the recent fundraising via QIP. The promoter pledge has already come down to around 8% of the total shareholding, and with the expected IPO of the real estate arm, we expect this to gradually reduce further. We cut our estimates by 13%/12%/11% for FY25E/26E/27E to factor in weaker-than-expected Water segment performance and slightly higher interest costs. We revise our SoTP-based TP down to INR1,200 based on 17x P/E. We reiterate our BUY rating on the stock.

Outlook

KPIL is currently trading at 16.1x/12.1x FY26E/FY27E EPS. We reiterate our BUY rating with a revised SoTP-based TP of INR1,200, based on 17x P/E for the core business.