ICICIDirect's research report on Kalpataru PowerKalpataru Power (KPTL) reported disappointing revenue execution trends in Q3FY16 at | 868 crore, down 24.3% YoY. The disappointment came in from execution of lower order backlog carry in the past six to nine months. However, for 9MFY16 order inflows crossed | 4800 crore. Management has upped its FY16E guidance in excess of | 7000 crore. Order backlog was at | 7000 crore as of Q3FY16 thereby indicating strong revenue visibility in FY17E-18E Strong composition of fixed price contacts in the backlog and a resultant reduction in steel prices have provided strong margin gains for KPTL as margins for Q3FY16 came in higher at 10.8% vs. estimate of 10.3%. Going ahead, margins are expected to be in the range of 10-11% on the back of pick up in both transmission and infrastructure segment revenues. Despite a big miss on revenue, PAT was slightly below estimates at | 38 crore on the back of better margins and lower-than-expected finance costs, down 33% YoYThe management has guided for 15-20% revenue growth for FY17E with strong ordering pipeline. Given strong visibility we forecast revenue, PAT CAGR of 15.8%, 13.1%, respectively, in FY16E-18E.With a strong order intake in excess of | 4800 crore and strong L1 position of | 2000 crore, we expect KPTL to report strong order inflow trends. This, we believe, will help a pick-up in revenue execution in FY17E-18E, which will lead to revenue CAGR of 15.8% over the same period. Even EBIDTA margins are expected to remain upwards of 10% leading to PAT CAGR of 13%. We retain our BUY rating with a SOTP based target of | 234/share (base business valued at 12x FY18E EPS). For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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