Buy Kalpataru Projects; target of Rs 1550: Emkay Global Financial

Emkay Global Financial's research report on Kalpataru Projects

We maintain our BUY rating on Kalpataru Projects International (KPIL), with revised up TP of Rs1,550/share (Rs1,400/share earlier), mainly led by 8%/11% increase in execution during FY26E/FY27E, respectively, given strong order back-log and gradually-receding labor challenges. The management is confident of achieving 20% revenue growth in FY25, coupled with gradual improvement in profitability. This would be mainly led by the T&D (domestic and international), Building and Factories, and Water (drinking, sanitation, and irrigation) segments. The company continues to focus on exiting the non-core business (Indore realty, road boot assets) which is likely to further deleverage an already-lean balance sheet. With the cyclical turnaround being in favor of engineering companies, KPIL stands to benefit the most among peers, due to its disciplined approach in order picking and impeccable execution track-record. Pledged shares have come down, from 31% at the end of FY24 to 28.8% now; we expect this to keep declining going ahead.

Outlook

KPIL offers a play on multiple high-growth end-markets, and has managed its margins and NWC volatility across cycles. This, along with ease in operations post-Q1FY25, has led us to expand our FY26E/FY27E revenue by +8%/+11%. We maintain our BUY rating on KPIL, continuing to value it at 20x 1YF PER, arriving at SoTP-based TP of Rs1,550/share (Jun-26E earnings).