Likely orders from Aramco to boost Kalpataru’s sales

For investors in Kalpataru Projects International Ltd, contract wins always bring excitement. According to news reports, Saudi energy giant Aramco has issued letters of intent for about 16 engineering, procurement and construction (EPC) packages worth about $10 billion for the third phase of its Master Gas System expansion.

“We understand from industry sources that KPIL qualified for three packages in this order (the final award and order value are awaited),” Nuvama Institutional Equities analysts wrote in a 23 February report. The brokerage anticipates potential earnings-per-share upgrades and a re-rating of Kalpataru’s stock as and when these projects are awarded.

As of the end of December, the company’s order book was at ₹51,753 crore. It is focused on large projects with sustainable margins and better cash conversion. Its order pipeline remains strong across segments.

Kalpataru has guided for consolidated revenue growth of 20-25% for FY24. With around 80% of its order book to be executed in 2-3 years, the company is confident of achieving its revenue growth target. In 9MFY24, revenue was up 19% year-on-year at ₹13,655 crore.

Amit Anwani, an analyst at Prabhudas Lilladher, said he expects Kalpataru’s revenue to grow at an 18% compound annual growth rate (CAGR) from FY24-FY26. However, with the anticipated order wins from Aramco it has the potential to grow at about 25% in this period, he added.

That said, the biggest overhang for the stock has been promoter pledge. With the real estate sector recovering strongly, promoter pledges have fallen to around 39% in February from 44.5% in September. The company anticipates a significant drop in the next 6-12 months.

Investors should also track the monetisation of KPIL’s largest road asset, Vindhyachal Expressway.

Kalpataru has guided for consolidated revenue growth of 20-25% for FY24