Maintain BUY on Kalpataru Power Transmission - Execution-led beat - HDFC Securities

Mr. Parikshit D Kandpal, Institutional Research Analyst, HDFC Securities

We maintain BUY on Kalpataru Power (KPTL) with an SoTP of Rs 357/sh (core 10x FY22EPS). 1QFY21 performance was a beat on all fronts, driven by robust execution amidst a challenging environment, as well as cost rationalisation. Multiple triggers are in place for a further re-rating with (1) execution efficiency reaching ~90% pre-COVID level (~75-80% execution in May-20), (2) monetisation of three BOOT transmission assets during FY21E on track, and (3) restructuring of two JMC roads BOTs, which shall reduce cash burnout (Rs ~0.5bn in FY21E vs Rs ~0.8bn in FY20). No change in FY21/22 estimates.

1QFY21 highlights: Revenue: Rs 14.6bn ( -12%/-37% YoY/QoQ, 37% beat). EBITDA: Rs 1.56bn ( -19%/-38% YoY/QoQ, 59% beat). Margin was slightly down 91/29bps YoY/QoQ at 10.7% (vs est of 9.3%), but within the guided range of ~10.5-11%. Margin beat was driven by decent execution as well as cost curtailment. Interest cost at Rs 350mn (+3%/-24% YoY/QoQ) came in slightly lower-than-envisaged owing to debt reduction due to efficient WC management. Consequently, RPAT stood at Rs 690mn ( -25%/-35% YoY/QoQ, 138% beat vs est. of Rs 290mn). Standard net debt was at Rs 7.6bn vs Rs 9.9/9.7bn YoY/ QoQ (0.21x vs 0.27x QoQ).

Segmental performance: While T&D was flat YoY overall in 1QFY21(~Rs 9.5bn), Linjemontage operations are ramping up nicely with revenue of Rs 2.7bn (+ ~100% YoY) and margin improving from ~4.5% to ~5.5%. Railways and Oil & Gas (O&G) both saw ~25-30% decline. FY21E guidance is at ~5-10% revenue growth.

Robust order backlog and inflows: The order book as on 1QFY21 stood at Rs 135bn. YTD FY21 inflows of Rs 24.7bn (1QFY21 orders - Rs 18.7bn, 2QFY21- Rs 6bn). Order book as of now is Rs 141bn with Rs 10bn L1 in TDI. 2HFY21 Railways electrification/O&G bid pipeline remains robust at Rs 80/50bn. KPTL will also look at 2-3 TBCB bids selectively, but to execute and exit. Equity investments in these projects would be largely met from internal accruals to keep debt in check. KPTL is also open to strategic international acquisitions in smaller consideration sizes of $25-30mn.

Asset monetisation seems on track: KPTL expects to achieve zero standalone net debt status by Mar-21 (~Rs 8bn as on 1QFY21). It is in advanced stages of divesting stake in Kohima Asset to CLP India by Dec-20 (Element 3 to be commissioned soon, Elements 1 & 2 commissioned in 1QFY21). Closure of definitive agreements signed to sell Jhajjar (EV of Rs 3.1bn) & Alipurduar (EV of Rs 12.86bn) assets in 1HFY21 on track. KPTL has appointed advisors to find suitors for Shubham Logistics.

Shares of KALPATARU POWER TRANSMISSION LTD. was last trading in BSE at Rs.242.4 as compared to the previous close of Rs. 247.05. The total number of shares traded during the day was 28816 in over 1852 trades.

The stock hit an intraday high of Rs. 250.35 and intraday low of 239.95. The net turnover during the day was Rs. 7041521.

Source : Equity Bulls

Keywords