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  • Stock recommendation: Kalpataru Power Transmission — Buy — Target price Rs 560

    Publish date: August 10, 2018

    Results update: Steady on EPC front, turnaround in assets

    Kalpataru Power Transmission Limited (KPTL) saw its revenues surge in the quarter ended June, with its EPC (engineering, procurement and construction) business holding fort and its road business finally translating into cash profits.

    Key highlights

    • The EPC company saw its revenues, EBITDA and profit after tax (PAT) increase by 13%, 14% and 15% respectively. The numbers could have been higher but there may be some issues due to mounting working capital, which we feel will recede going forward.
    • The healthy toll collections has helped revive the road projects. The next step will be to refinance these projects, with the management suggesting they have already put a plan in place.
    • KPTL’s arm JMC Projects has a robust order book of Rs 50 billion. The management feels a strong execution of the orders will help JMC and KPTL grow at 15% for 2018-19.
    • KPTL’s arm Shree Shubham Logistics has increased its capacity utilisation, with the company trying to PAT breakeven in FY2019 and better results the following financial year.
    • The growing debt levels are a concern but it is showing signs of coming down already. The management explained that a delay in payment from customers was the primary reason for the debt levels to rise for some time.

    Valuation & outlook

    We expect the company to execute the backlog orders efficiently and its strong equity commitment in BOOT (build, own, operate, transfer) projects is likely to bolster revenues going forward.

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