Maintain BUY on Kalpataru Power Transmission - Marginal beat - HDFC Securities

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

Kalpataru Power (KPTL) reported 11% APAT beat. It has received 3QFY21 orders of Rs 29bn and is optimistic on achieving full-year guidance of Rs 90- 100bn. The sale of Alipurduar asset was completed during the quarter, and divestment of Kohima asset is on track. Restructuring of JMC's BOT road assets is likely to be concluded by June-21. KPTL acquired Fasttel during 4QFY21. It remains on track to achieve net zero debt status, with Indore real estate monetisation picking pace and Shubham Logistics operation performance improving. We maintain BUY on KPTL with an unchanged target price of Rs 536. Key risk: delay in monetisation/restructuring of assets.

Recovery on expected lines: Revenue: Rs 19.9bn (-0.7/+5.9% YoY/QoQ, 4% miss). EBITDA: Rs 2bn (-0.5/+2.5% YoY/QoQ, 7% miss). EBITDA margin: 10.4% (-12/+35bps YoY/QoQ, estimate of 10.7%). Interest cost: Rs 230mn (-45% YoY, flat QoQ). Other income: Rs 190mn (+19%/-48% YoY/QoQ). Exceptional items: Rs 1.54bn (Rs 1.47/0.7bn gain on sale of Alipurduar/Jhajjar assets). RPAT: Rs 2.57bn (+88%/+62x YoY/QoQ). APAT: Rs 1.42bn (+25.5/-2.2% YoY/QoQ), beating our estimates by 11%, on account of lower-than-expected interest cost, higher other income and lower effective tax rate. Net debt: Standalone net debt decreased to Rs 6.1bn from Rs 8.2bn QoQ (net D/E at ~0.16x). KPTL has maintained its guidance of flattish to positive growth and ~10.5% EBITDA margin for FY21, and double-digit growth FY22E onwards.

Monetisation of Kohima assets expected by FY21-end: KPTL successfully divested Jhajjar and Alipurduar asset and has already received the proceeds from the sale. Kohima asset achieved full commissioning, and is awaiting approvals for transfer. Management expects this asset to be sold by FY21-end. 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.

Order inflow guidance maintained: The company received orders of Rs 28.7bn during the quarter, taking the order book to Rs 133.2bn (~1.7x FY20 revenue). Additionally, it has won Rs 8.4bn of orders so far in 4QFY21 and is L1 in orders worth Rs 31bn. Total order book including FYTD21 wins and L1 stands at Rs 172.6bn. Management has retained annual order inflow guidance at Rs 90-100bn and expects to achieve it from a pick-up in domestic T&D and railways segments. The company declared an interim dividend of Rs 8.5 per share. KPTL also bought back shares for Rs ~1.8bn.

Update on acquisition: KPTL signed definitive agreements to acquire controlling stake of 51% in Fasttel, Brazil, for USD 8.8mn (Rs ~640mn). USD 4.7mn will be paid for acquiring shares from existing shareholders and USD 4.1mn will be infused into Fasttel for issuance of new shares to Kalpataru. With this acquisition, the company has made an inroad into the Brazilian market.

Shares of KALPATARU POWER TRANSMISSION LTD. was last trading in BSE at Rs.371.15 as compared to the previous close of Rs. 369.2. The total number of shares traded during the day was 20904 in over 704 trades.

The stock hit an intraday high of Rs. 390 and intraday low of 370.2. The net turnover during the day was Rs. 7958620.

Source : Equity Bulls

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