Kal­pataru Power Trans­mis­sion Ltd

(BSE Code: 522287) (CMP: Rs.304.60) (FV: Rs.2) By Pratit Nayan Pa­tel

Money Times - - Bull’s Eye -

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.

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