Sharekhan is bullish on Kalpataru Power Transmission has recommended buy rating on the stock with a target price of Rs 552 in its research report dated March 26, 2019.
Sharekhan's research report on Kalpataru Power Transmission
KPTL ventures into Nordic countries and European market with the acquisition of Linjemontage. KPTL acquires 85% stake at an EV of $24 million (8.6x its EV/EBITDA CY2018) to be funded majorly through internal accruals and some short-term debt. The deal is marginally value accretive considering 5% yield on current cash and 85% stake in Linjemontage’s FY2019E net earnings. Linjemontage has a strong revenue growth profile (average 35% over trailing three years) and high return ratios (average 25% ROCE over trailing two years) with $77 million order book (1x its CY2018 revenue).
The deal is reasonably valued and provides deeper access to KPTL in international markets (currently has 36% international orders). We await transaction to get closed by Q1FY2020. We maintain our Buy rating with unchanged PT of Rs. 552.
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