Maintain BUY on Kalpataru Power Transmission - In-line performance - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

Kalpataru Power (KPTL) reported in-line revenue/EBITDA at Rs 23.3/2.4bn. However, APAT missed our estimates by 12% on higher than expected interest cost and taxes. Impact of CTC provision of Rs 1.4bn, to account for higher commodity prices, was negated by reversal of earlier provisions. It received orders of Rs 84bn during FY21, taking the order book (OB) to Rs 139bn. Management has guided for 10-15% top-line growth in FY22. However, margins could come under pressure on sustained higher commodity prices as 60% of OB is fixed price. KPTL remains on track to achieve net zero debt status by 1HFY22, with (1) divestment of transmission assets coming to an end, (2) Indore real estate monetisation picking up pace and, (3) Shubham Logistics operation performance improving. We maintain BUY on KPTL and increased target price to Rs 560 (vs Rs 553 earlier), to account for higher EPS from JMC Projects.

Recovery on expected lines: KPTL reported revenue at Rs 23.4bn (+1.5%/+17.3% YoY/QoQ), in-line with our estimates. EBITDA came in at Rs 2.4bn (-4.0/+17.4% YoY/QoQ, beat of 2%). KPTL made CTC provisioning of Rs 1.4bn during the quarter to account for the higher commodity prices. However, reversal of earlier provisions on project closures negated the impact on EBITDA margins. APAT was at Rs 1.3bn (+21.5%/-8.1% YoY/QoQ), missing our estimates by 11.6% on higher than expected interest cost and taxes. Shubham logistic margin were impacted on debtor provisioning.

FY21 order inflow driven by international T&D: KPTL received orders of Rs 84.4bn during FY21, taking the order book to Rs 139bn. Including the L1 of Rs 13bn, OB stands at Rs 152bn. In the absence of domestic T&D ordering, KPTL to focus on international ordering through Linjemontage and Fasttel. At home, it will focus on Oil & Gas and railways business, which now form 13% of the order book each.

Zero net debt by 1HFY22: Majority of the approvals are in place for Kohima asset sale to CLP India. However, completion was delayed due to COVID- led restrictions and is now expected by 1QFY22. KPTL standalone net debt stood at Rs 7.8bn (net D/E 0.2x). With divestment of transmission assets, KPTL is well on track to achieve its zero net debt target on the standalone level. About Rs 6bn of inflows are expected from Kohima asset sale.

Shares of KALPATARU POWER TRANSMISSION LTD. was last trading in BSE at Rs.383.55 as compared to the previous close of Rs. 381.3. The total number of shares traded during the day was 15265 in over 552 trades.

The stock hit an intraday high of Rs. 394.05 and intraday low of 382.45. The net turnover during the day was Rs. 5896466.

Source : Equity Bulls

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