Buy Kalpataru Power Transmission; target of Rs 708: HDFC Securities

HDFC Securities' research report on Kalpataru Power Transmission

Kalpataru Power (KPTL) reported revenue/EBITDA/APAT of INR 35/3/1.1bn, (missing)/beating our estimates by 2.9/4/(11)%. Healthy execution growth was witnessed in Water, B&F, O&G and Urban Infra businesses. KPTL secured new orders worth INR 195bn in FYTD23, taking the order book (OB) to an all-time high of INR 414bn (excluding L1 of INR 52bn). KPTL is eyeing transmission, B&F, Water and Railways as the growth driver. With the merger completed with JMC, KPTL expects a financial synergy in terms of interest cost savings of INR 500-700mn in FY24. The merged entity is well-placed to bid for larger project sizes in both domestic and international markets. Within the domestic market, water and transmission opportunities are huge; KPTL expects a 60-70% opportunity within the water segment is yet to open as other states start opening tender under JJM (mostly carried by UP till now).

Outlook

We have recalibrated our estimates higher to factor in strong order inflows. We roll forward our valuation to Dec 24E and maintain a BUY rating on the stock with an increased SOTP valuation of INR 708/sh.