Buy Kalpataru Projects International; target of Rs 1178: Prabhudas Lilladher

Prabhudas Lilladher's research report on Kalpataru Projects International

We revise our FY26/FY27E EPS estimate by –6.0%/-4.9%, due to delayed collection in the Water business impacting the revenue and slowdown in the Railway segment, despite strong growth T&D, B&F and O&G. Kalpataru Projects -International (KPIL) reported decent quarterly performance with standalone revenue growth of 16.4% YoY and flattish EBITDA margin YoY at 8.3%. Strong execution of a robust order book across various segments contributed to revenue growth, although delayed collections negatively impacted the Water business. Net working capital (NWC) days came in at 112 days (same as Q3FY24); however, quicker collection of receivables from water segment and reduction of debt through QIP proceedings (standalone net debt down by ~35.0% to Rs1.8bn in Q3FY25) will help reduce NWC days. The demand outlook remains robust in T&D, B&F and Oil & Gas, while recovery ramp-up will aid growth in the Water segment. The company will remain selective in order booking in Railways with focus on international market. The management upgrades the PBT margin to 5% for Q4FY25 (vs 4%-4.5% earlier).

Outlook

The stock is trading at a P/E of 15.5x/11.1x on FY25/26E core-EPS. We value the stock on SoTP-based TP of Rs1,178 (Rs1,306 earlier) valuing the core business at a PE of 17x on Sep-FY26E (18x on Sep’26E earlier) given the shar correction in the stock price. Upgrade to ‘Buy’.