Kalpataru Projects - Growth Triggers Intact: HDFC Securities

HDFC Securities Institutional Equities

Key takeaways from Kalpataru Projects International Ltd.’s FY24 annual report are as follows:

1. geographically a well diversified order book and robust bid pipeline;

2. strong balance sheet with robust order pipeline to aid margin improvement;

3. exploring new business avenues to diversify its portfolio further; and

4. the increase in net debt was mainly due to higher working capital requirements which will come down in coming quarters as the Saudi Aramco deal is less WC intensive.

On the monetisation of BOOT assets, Kalpataru Projects is looking for prospective buyers and is in the advanced stages of a non-binding offer for VEPL by Q1 FY25. Moreover, it has guided net working capital days as of FY25 to be below 100 and a capex of Rs 5 billion for FY25.

Given robust order booking, improving growth outlook, and strong balance sheet and NWC, we increase our price/earning target multiple to 20 times (versus 18 times earlier).

Due to supply chain issues and geopolitical friction, we maintain our estimates that factor in slower-than-expected margin recovery.

Maintain a Buy rating on the stock with an increased target price of Rs 1,702/share (20 times September-26E earning per share, Rs 44/share for subsidiaries).

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