Orders from Railways helped KPTL achieve 20% y-o-y Growth Target

Good ordering in railways and L1 pipeline has helped KPTL come in striking distance of achieving the 20% y-o-y growth target for ordering in FY2018E.

Good ordering in railways and L1 pipeline has helped Kalpataru Power Transmissions Ltd (KPTL) come in striking distance of achieving the 20% y-o-y growth target for ordering in FY2018E. These non-T&D businesses have driven growth in execution in H1FY18 without diluting overall margins. Current backlog and good growth prospects put KPTL on track to reach RoCE of 20% and a debt-free balance sheet by FY2020. We revise our estimates by 2-8%, raise earnings multiple of JMC Projects to 12X and roll forward to September 2019E TP of Rs 470 (from Rs 415). KPTL reported a reasonable quarter with a 10%/9%/24% y-o-y growth in sales/EBITDA/PAT. The results suggest the levered nature of business (interest cost down 26% y-o-y) and curtailed GST-applied brakes on execution.

YTD backlog (including recent order wins) is >2X trailing 12 months revenues and should support strong rebound in execution. Composition of such backlog suggests limited reliance on PGCIL at 13% (both railways and pipeline businesses have similar share). Non-TD businesses are driving scale-up in ordering (40% share in YTD ordering) and all of the 4% y-o-y growth in H1FY18 execution. They form a reasonable share of execution (~20%) and are helping grow overall EBITDA margin. As in T&D, the company is well-placed in these segments with a 15-20% hit rate and good ordering prospects.

JMC Projects’ Q2FY18 results mirrored Q1FY18 performance with a 24%/27%/110% y-o-y growth in sales/EBITDA/PAT. EBITDA margin has reached double-digit levels. Delay in award/dropping off certain L1 orders has led to subdued ordering in H1FY18 and a still healthy order backlog at >2X FY2018E revenues. The company expects R600-700 million of support in FY2018 to its ailing BOT projects and nothing further in FY2019, has recently completed 5/25 in one stressed project and expects the same for the other stressed project over the next six months.

Kalpataru Power Transmission Limited is amongst the largest players firmly entrenched in the global power transmission and infrastructure EPC space. With proven experience and expertise spanning over three decades, KPTL today has established its footprints in over 40 countries, executing marquee projects with comprehensive capabilities that deliver complete solutions covering design, testing, fabrication, erection and construction of transmission lines, oil and gas infrastructure and railways projects on a turnkey basis.

KPTL is part of the Kalpataru Group established in 1969. It is a diversified conglomerate spanning Real Estate, Power Generation and Transmission, Construction of Roads, Factories, Buildings and Oil and Gas Infrastructure and Agri-Logistics spaces.

Over 2000 strong technical manpower of KPTL delivers compelling advantage, combining in-house research, engineering and manufacturing that ensure the highest value proposition to clients. The Company has an annual production capacity of over 180,000 MT of transmission towers at its three state-of-the-art manufacturing facilities in India and an ultra-modern tower testing facility, making it amongst the global largest power transmission EPC Company. KPTL’s wide reach and presence includes international geographies like Africa, CIS countries, the Middle East, SAARC, Asia-Pacific and the Americas.

In India, the Company has been partnering India’s accelerating infrastructure push by executing EPC projects in Oil & Gas infrastructure and Railways infrastructure as well as undertaking power transmission projects on Build, Operate, Own, and Transfer (BOOT) model.

KPTL’s Oil & Gas business includes providing EPC contracting services for cross-country pipelines, terminals and gas gathering stations across diverse territories. The Company provides end-to-end solutions through a well-qualified engineering and designing team for successful and timely completion of projects.

KPTL’s Railway Infrastructure EPC vertical aids in accelerating economic development in domestic and international markets by leveraging proven expertise in project management capabilities, engineering & construction experience combined with strong technical and financial support. The Company is providing railways EPC services for executing civil infrastructure, track laying, signaling & telecommunication and over-head electrification projects for railways in India.

KPTL has successfully positioned its High Voltage Substation business both in air insulated (AIS) and gas insulated (GIS) segment in domestic as well as international market.

KPTL has expanded its operations under the promising transmission line BOOT projects under Public Private Partnership (PPP) mode. The Company has successfully developed two projects in Jhajjar (Haryana) and Satpura-Ashta (Madhya Pradesh). Both these projects were completed ahead of schedule and are operational. KPTL is in the process of developing its third transmission line BOOT project under the SPV Alipurduar Transmission Limited.

As an integral part of its long-term asset creation goal, KPTL has expanded its scope into Civil Construction, Infrastructure Projects, Road BOOT Projects as well as Agri-Logistics through its subsidiaries JMC Projects (India) Limited and Shree Shubham Logistics Limited.

Quality, Environment and Occupational Health & Safety are at the core and fore of every KPTL project. The unwavering focus on global quality standards has ensured ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 certifications.