Kalpataru Power Transmission - Muted performance - HDFC Securities

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

Kalpataru Power (KPTL) reported revenue/EBITDA of INR 15.8/1.6bn, a miss of 6/7%. APAT too missed our estimates by 21% on higher-than-expected interest cost and taxes. KPTL secured new orders worth INR 8.6bn in Q1, taking the order book (OB) to INR 134bn. Management has guided for 10-15% topline growth in FY22 with double-digit margins. It expects to achieve a net cash status by FY22, with INR 7bn of cumulative cash flows from the transmission asset divestment and Indore real-estate project. The Shubham logistics monetisation has been deferred by a couple of years, owing to limited interest. We roll forward our SOTP target price to INR 590/sh (Jun-23E, INR 560 earlier), maintain BUY, and retain our earnings estimates.

Q1FY22 financial highlights: KPTL reported revenue of INR 15.8bn (+8.7%/32.1% YoY/QoQ), a miss of 6%. T&D revenue grew by 12% YoY, O&G by 28% YoY and railways by 23% YoY. EBITDA came in at INR 1.6bn (+3.8/- 33.3% YoY/QoQ, a miss of 7%). KPTL continues to hold (cost to completion) CTC provisioning of INR 1.4bn made in Q4FY21 as commodity prices have not reversed. Other operating expenses, at INR 1.6bn, were higher by 40% YoY, partly on account of higher freight cost. The company is expecting a hit of USD 6mn in FY22 and has booked USD 3mn in Q1FY22. APAT was at INR 760mn (+10.1%/-41.5% YoY/QoQ), missing our estimates by 20.7%.

Lifting of the World Bank ban in Oct-21 to aid access to larger bidding pool: KPTL received orders of INR 8.6bn, taking the order book to INR 134bn. Including the L1 of INR 25.5bn, the OB stands at INR 159.5bn. The company expects order inflows of INR 90bn for FY22 with INR 20bn each in O&G and railways and INR 50bn in T&D. Internationally, it is expecting a few orders in O&G in FY22; in transmission, significant opportunity opens up after Oct-21, when the World Bank imposed debarment ends (on World Bank funded projects in Africa and SAARC); in railways, KPTL is confident of receiving a few more orders from neighboring countries in FY22. For the remaining part of the year, the order pipeline is expected at INR 400-450bn.

Net cash status by FY22: The Kohima transmission asset sale to CLP India is now expected to complete by Q2FY22 as a few banking and regulatory approvals are pending. The standalone net debt stood at INR 12.2bn (net D/E 0.31x). KPTL is well on track to achieve a net cash target at the standalone level, following the sale of Kohima asset and collection from Indore Real estate project. KPTL is targeting FY22 cash inflow of more than INR 1.5bn from the Indore project and expecting around INR 5.5bn from the Kohima asset sale. KPTL promoters have maintained their commitment of reducing pledged shares to 40% of holding by Dec-21.

Shares of Kalpataru Power Transmission Ltd. was last trading in BSE at Rs. 467.35 as compared to the previous close of Rs. 472.25. The total number of shares traded during the day was 27507 in over 1483 trades.

The stock hit an intraday high of Rs. 482.1 and intraday low of 461.45. The net turnover during the day was Rs. 12881684.

Source : Equity Bulls

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