KPIL: Strong Growth Trajectory

Kalpataru projects (KPIL) is amongst the leading EPC players in infrastructure sectors such as Power T&D, Buildings & Factories, Oil & Gas, Urban Infra, Water and Railways. With a diversified portfolio, presence over 73 countries, delivering world class engineering solutions to its clients with experienced team to successfully deliver complex one-of-a-kind projects.

The company’s revenue grew 16.2% CAGR (FY22-24) whereas, EBITDA & PAT grew by 25.7% CAGR & 23.4% CAGR respectively over the same period.

Strong visibility in domestic market across T&D and B&F segment:  The company has set a target of ₹23000 crore of order inflows in FY25E, which would be mainly led by T&D and B&F segment. KPIL gas secured Orders of ₹7,015 Crores and L1 of ~ ₹5,000 Crores till date in FY25E. The main inflows (including L1) led by T&D (61%) and B&F (28%) and Water (11%). The company commands strong order backlog of ₹57195 crore, up 21% YoY which will ensure strong double digit revenue growth. On the international front, KPIL’s robust international T&D order pipeline provides conviction toward the company delivering ~25% YoY topline growth in Lindjemontage while Fasttel is seeing completion of legacy orders and is witnessing growth in order backlog.

On the margins front, the company is winning orders at double digit margin which will positively impact the margins from H2FY25E onwards. KPIL has maintained its margin guidance of 8.5-9% at the EBITDA level and 4.5-5% at PBT level.

Non-Core Divestment on Track which will lead to improvement in return ratios: KPIL is well on track to divest Vindhyachal Expressway (VEPL) and Indore Real Estate. The management has been approached by a large global investor regarding VEPL, which has the largest exposure among road assets. The company is likely to receive cash flow worth ₹5.5bn in FY25E.

This along with strong operating performance and control/improvement in working capital will help the company to increase RoE’s from 10.3% in FY24 to 13.1%/15.5% in FY25E/FY26E, respectively.

With strong Revenue and PAT CAGR of 23.5% and 46.9% over FY24-FY26E coupled with improvement in balance sheet (divestment of non-core assets) and return ratios will likely rerate the stock.

We rate the stock as Buy and assign a Target of ₹1630 (23x FY26E EPS).