Kalpataru Power Transmission Ltd
(BSE Code: 522287) (CMP: Rs.304.60) (FV: Rs.2) By Pratit Nayan Patel
We had recommended this stock earlier at Rs.379.3 on 16 July 2018, where-after it zoomed to Rs.408.6. The stock has fallen sharply and is now available below our recommended level due to the sharp panic in the market. We believe this is a good opportunity for investors to enter or average as the company posted stable Q1 results.
Company Background: Incorporated in 1981, Kalpataru Power Transmission Ltd (KPTL) is an EPC (Engineering, Procurement and Construction) company engaged in power transmission and distribution (T&D), oil and gas pipeline, railways, infrastructure development, civil contracting and warehousing and logistics. It has a strong international presence in the power T&D segment. Its operations span across 50+ countries. It has executed marquee projects with comprehensive capabilities that deliver complete solutions covering design, testing, fabrication, erection and construction of transmission lines, oil and gas infrastructure and railway projects on a turnkey basis. KPTL has three state-of-the-art manufacturing facilities in India with a capacity of over 1,80,000 TPA of transmission towers and an ultra-modern tower testing facility, making it amongst the largest power transmission EPC companies globally. It provides railway EPC services for executing civil infrastructure, track laying, signaling and telecommunication and overhead electrification projects. It has expanded its operations under the promising transmission line BOOT (Build-Own-Operate-Transfer) projects through the Public Private Partnership (PPP) model. It has expanded its scope into civil construction, infrastructure projects, road BOOT projects as well as agri-logistics through its subsidiaries - JMC Projects (India) Ltd and Shree Shubham Logistics Ltd.
Financials: With an equity capital of Rs.30.69 crore and reserves of Rs.2642.71 crore, KPTL’s share book value works out to Rs.183.75. The promoters hold 59.32% of the equity capital, Mutual Funds hold 19.08%, FPIs hold 4.77% and Insurance Companies hold 2.83%, which leaves 13.98% stake with the investing public.
Performance Review: For FY18, KPTL reported
14% higher sales of Rs.8741.72 crore with 77% higher PAT of Rs.278.27 crore and an EPS of Rs.18.29. During Q1FY19, it reported 15% higher
PAT of Rs.81.04 crore on 10% higher sales of Rs.1324.93 crore and an EPS of Rs.5.28. Its bottom-line has grown at 32% CAGR over the last 3 years. It paid 125% dividend for FY18 v/s
100% dividend for FY17.
Industry Overview: Over $640 billion is estimated to be invested in the global transmission industry by 2020 and subsequently another $500 billion between 2021 and 2025. Around 74% of the investment is expected to be spent on developing new high voltage projects while 22% is envisaged to be spent on replacement and upgrades of transmission assets. Geographically, Asia led by China and India will account for the highest investment levels at 56% of the total, followed by Europe and North America. Around Rs.260000 crore is estimated to be invested under the 13th National Electricity Plan (NEP), which reflects significant growth in the power transmission sector. Around Rs.160000 crore is expected to come from states and the balance Rs.100000 crore from Power Grid Corporation of India. Further, the government plans to increase the size of projects and scope of work in the transmission sector. Also, the interconnections with neighboring countries like Bangladesh, Nepal, Bhutan and Sri Lanka has been emphasized upon in the plan.
Conclusion: KPTL had an order book of ~Rs.13742 crore as at 30 June 2018 and it recently received new orders of ~Rs.1145 crore. Its subsidiary JMC Project, too, had a strong order book of ~Rs.9814 crore as at 30 June 2018 and it recently received an order of ~Rs.1080 crore.
The stock is available at around 43% discount to its 52-week high of Rs.535.95 recorded in January 2018. Currently, the stock trades at a P/E of 14.06x and looks attractive based on its financial parameters. Investors can accumulate the stock between Rs.310-280 with a stop loss of Rs.250 for a price target of Rs.475-500 in the next 15-18 months. The stock’s 52week high/low is Rs.535.95/292 and its market cap stands at Rs.4674.41 crore.