KPTL is confident on achieving growth guidance of minimum 20%, EBITDA margin of 10.5-11%. Approval process for transfer of Transmission Assets to CLP is progressing well and are as per planned timelines. We have cut standalone EPS for FY20/21E by 5/7% due to lowering margin and higher interest cost and tax adjustments. With strong revenue visibility on back of robust order-backlog, steady margin profile and positive outlook in T&D and emerging segments like Railways/Oil & Gas, KPTL is expected to deliver ~26% earnings CAGR over FY19-21E. With focus on improving capital allocation, balance sheet strengthening and strong visibility, we maintain PE multiple of 14x to core EPC business and maintain BUY with revised SOTP based TP of Rs662.
Given the strong order book across segments and improving prospects of domestic T&D with strong scaling up of non T&D business, we expect the revenues to grow at 15% CAGR during FY19-20E. We value Kalpataru on SOTP basis with standalone business at 14x to FY21E EPS, JMC by giving discount to market cap, SSL on book value and Indore real estate project on B/V. We arrive at a target price of Rs. 591 for a “BUY” rating representing an upside potential of 25%.
We believe with strong revenue visibility, steady margin profile and positive outlook in T&D and emerging segments like Railways/Oil & Gas, will help KPTL deliver 20% earnings CAGR over FY19- 21E. With focus on improving capital allocation, balance sheet strengthening and strong visibility, we raise PE multiple of 14x (12x) to core EPC business and maintain BUY with revised SOTP based TP of Rs624.
The first quarter of FY20 was strong in terms of revenue and profitability, despite a slight decline in margins. The management, however, has retained its guidance for FY20. It has highlighted the sale of transmission asset portfolio and plans for the use of the proceeds for capex, debt reduction, and working capital. We estimate sales and earnings CAGR of 17%/21% over FY19-21E. We maintain our FY20/21 estimates and reiterate Accumulate rating for the stock, with a SOTP based TP of 530.
Maintain Buy with a revised PT of Rs. 590: KPTL ispositioned in apt business segments such as T&D, railways and oil & gas, which are expected to see healthy order inflows, going ahead. We have, however, lowered our net earnings estimates for FY20-FY2021 factoring in higher debt levels, a rise in depreciation and lower other income. Consequently, we have arrived at a revised SOTP-based price target (PT) of Rs. 590. We maintain our Buy rating on the stock considering KPTL’s positive business outlook and near-term positive triggers like asset divestment.
KPTL’s strong order book with good traction in non-T&D business (railways, pipeline), improved subsidiary performance and operating leverage gains are expected to support consistent growth. Also, diversification in international T&D markets would provide good opportunities. Strategy to monetise non-core assets and sales proceeds from three transmission assets would improve return ratios. We value KPTL on a SoTP basis and maintain BUY with a revised fair value of Rs 570/share (with base business at 13x FY21E).
Maintain Buy with a revised PT of Rs. 620: KPTL is positioned in apt business segments such as T&D, railways and oiland gas, which are expected to see healthy order inflow going ahead.We have increased our valuation multiple for its core business due to positive business outlook in KPTL’s SOTP-based valuation, considering KPTL’s positive business outlook and asset divestment expected in thisfiscal year. Hence, we have arrived at a revised price target (PT) of Rs.620. We maintain our Buy rating on the stock.
Looking ahead, we expect KPP to be one of the key beneficiaries of strong transmission capex in both domestic and global markets, which would drive 16% CAGR in earnings through FY19-21E. Valuing its standalone business at Rs493 (14x of FY21E standalone earnings), JMC at Rs49 (10x of FY21E earnings) and SSL at 50% discount to potential valuation at Rs10/share, we maintain our BUY recommendation on the stock with a revised Target Price of Rs591 (from Rs544 earlier).
KPTL’s overall strong order book with strong traction in non-T&D business (railways, pipeline), improved the subsidiary performance. Operating leverage gains and good traction in road BOT projects are expected to support consistent growth. Also, entry in Nordic markets will provide opportunities and diversification in international T&D markets. Strategy to monetise non-core assets will improve return ratios. With revenue and PAT CAGR of 16.6% and 19.0%, respectively, in FY19-21E, we value KPTL on a SoTP basis and maintain BUY with a revised fair value of Rs 550/share (with base business at 12.5x FY21E).
On the back of a good Q4 and order visibility, we remain positive on stock We have increased our FY20 sales/EBITDA/PAT estimate by 5%/12%/5% to factor into increased growth guidance given by the company. We maintain our Accumulate rating for the stock with a SOTP based TP of ` 530. We value the T&D EPC business at a PE of 12xFY21E, at par with KEC.
Maintain Buy with an unchanged PT of Rs. 552: KPTL was ahead of our expectations for Q4FY2019. Supported by execution in the non-T&D segment, the overall growth outlook is healthy. With improvement in order intake from overseas, state T&D and orders from the green energy corridor, the medium to long-term growth drivers are in place. The company has maintained 15-20% (expecting 12% revenue growth from T&D and 30-35% revenue growth from railways and oil and gas) guidance with stable margins of 11% for FY2020. Focus on working capital and debt reduction will strengthen the balance sheet. Given the healthy growth outlook and value-unlocking of subsidiaries, we expect revenue and earnings CAGR of 15% and 19% over FY2018-FY2021E. We maintain our Buy rating on the stock with an unchanged price target (PT) of Rs. 552 on an SoTP basis.
The current order back of Rs141 bn (2x FY19) gives strong revenue visibility. The company has guided for order inflow of Rs100 bn for FY20 led by opportunities due to Green Energy Corridor in the domestic market and from SAARC and Africa in international geographies. KPTL has guided for sales growth of 15-20%, EBITDA margin of 10.5-11%. The company has also Identified key areas in automation and digitization in the areas of supply chain and delivery to improve the profitability and profitability. We believe steady margin profile and healthy outlook in T&D and emerging segments like Railways/Oil & Gas will help KPTL deliver 19% earnings CAGR over FY19-21E. We recommend BUY on the stock with revised SOTP based target price of Rs565.
KPTL’s overall strong order book with strong traction in railways and infra (oil & gas, pipeline business), improved the subsidiary performance, operating leverage gains and good traction in road BOT projects to support consistent growth and will improve return ratios. With revenue and PAT CAGR of 17.3% and 18.8%, respectively, we value KPTL on a SoTP basis and maintain BUY with a revised fair value of | 500/share (we roll our estimates to FY21E with base business at 12x FY21E). However, a gradual up-tick in execution could lead to much stronger revenue growth, going ahead.
Maintain Buy with unchanged PT of Rs. 552: We have not factored Linjemontage’s valuation at this stage and await the transaction to get closed in Q1FY2020. We expect KPTL to benefit from Linjemontage’s acquisition on account of reasonable valuation and access to newer markets with possibility of scaling up Linjemontage’s business through its backing (bidding capability increased to medium and large-size orders and low-cost procurement benefits). Further, Linjemontage, being a profitable company, can provide dividends to KPTL from its first year of acquisition itself. We continue to maintain our Buy rating on the stock with unchanged price target (PT) of Rs. 552.