Buy Kalpataru Power says indiabulls research,

Healthy order inflow to continue

Kalpataru Power Transmission Limited (KPTL)’s revenue jumped 10.4% yoy

in Q1’11 at Rs. 5.38 bn as against Rs. 4.87 bn in the year-ago period. Net

profit grew 26.1% yoy to Rs. 369 mn as against Rs. 292 mn in the year-ago

period due to improvement in operational efficiencies. We believe the

Company would witness healthy order inflow in the coming quarters owing to

burgeoning demand in the EPC services (especially power). Besides, the

Company has strong order book, which provides a near-to-medium term

revenue visibility. Additionally, our DCF based target price, Rs. 215, provides

an upside of 16% over the CMP. Hence, we recommend a Buy.

Strong order book to drive growth: Currently, KPTL standalone order book

stands at ~Rs. 50 bn. The orders consist of 90% of transmission, 5% of

distribution and 5% of orders from infrastructure space. The Company's

current order book provides top line visibility for next one and half years. We

believe the Company would continue to witness healthy order inflow in the

coming quarters given its commendable reputation in providing EPC services

in the power Transmission and Distribution (T&D) segment. This is evident

with the Company’s recently bagged orders worth over Rs 5.5 bn from the

Kenya Electricity Transmission Company (KETRACO) and Parbati Koldam

Transmission Company. KETRACO, owned by Kenya government designs,

constructs, operates and maintains high voltage electricity transmission lines

in Kenya. The order received by the Company from Parbati Koldam

Transmission Company, a joint venture between Power Grid Corporation and

Reliance ADAG, is for supply and erection of the Koldam-Ludhiana

Transmission Line. Hence, we believe the Company’s top line to grow at a

CAGR of ~10% during FY10-12E.