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Execution focus in FY12
KPP's sales weak on execution delays, JMC execution picks up
KPP's margins maintained at 11%, margin compression at JMC
Order backlog of INR99.8b to drive strong top-line growth in FY12E
BUY for inexpensive valuations and diversified business mix
Strong sales growth in JMC
Kalpataru Power (KPP) reported
standalone sales of INR8.8b (up 5.5% y-y,
up 11.8% q-q), lower than our estimate of
INR10.1b due to delays in execution of
projects in Algeria. Both the power and
infrastructure segments reported lowerthan-
expected sales of INR7.9b (up 7.2%
y-y, up 15.6% q-q) and INR0.7b (down
9.3% y-y, down 17.1% q-q), respectively.
JMC Projects (JMCP IN, Not rated)
reported strong top line of INR4.9b (up
30.1% y-y, up 33.7% q-q).
KPP maintains margins, JMC margins contract
KPP reported standalone EBITDA margin of 11.0%, up 10bps y-y, as the
increase in other expenses (by 370bps) was offset by lower raw material
and sub-contracting costs. Subsidiary JMC Projects reported EBITDA
margin of 7.4%, down 155bps y-y, on rising construction expenses. KPP
reported standalone net profit of INR0.62b (up 7.3% y-y, up 21.3% q-q),
which was higher than our estimate of INR0.58b due to lower-thanexpected
effective tax rate and interest expense.
Backlog to drive strong top-line growth in FY12E
KPP booked orders worth INR9.5b in FY11, driven by order intake of
INR5.4b from PGCIL (PWGR IN). The order intake for JMC Projects was
weak at INR3.0b (down 65.7% y-y), due to intense competition and
management’s decision to avoid margin-dilutive orders. KPP ended the
quarter with a consolidated backlog of INR99.8b (INR54.8b standalone
and INR45b for JMC). KPP’s management guides to top-line growth of
20% standalone and 30-35% for JMC Projects for FY12. The company
expects to maintain margins at current levels since 75% of the order
backlog has a price variation clause.
Reiterate BUY
KPP shares trade at a P/E of 7.8x our FY12 EPS estimates, while its
peers trade at a median P/E of 6.0x on our FY12 EPS estimates. We
reiterate our BUY rating on KPP based on its well-diversified business
mix and top-line growth of 22% in FY12E, driven by current order backlog
of INR99.8b. Our TP of INR181 is based on an average of: 1) P/E-based
SoTP fair value of INR157/share, 2) EV/EBITDA-based SoTP fair value
of INR194/share, 3) P/E-based fair value of INR154/share, based on 10x
FY12E consolidated EPS of INR15.4, and 4) DCF-based fair value of
INR216/share. KPP has already raised funds for its expansion plans,
working capital requirement and BOT projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Execution focus in FY12
KPP's sales weak on execution delays, JMC execution picks up
KPP's margins maintained at 11%, margin compression at JMC
Order backlog of INR99.8b to drive strong top-line growth in FY12E
BUY for inexpensive valuations and diversified business mix
Strong sales growth in JMC
Kalpataru Power (KPP) reported
standalone sales of INR8.8b (up 5.5% y-y,
up 11.8% q-q), lower than our estimate of
INR10.1b due to delays in execution of
projects in Algeria. Both the power and
infrastructure segments reported lowerthan-
expected sales of INR7.9b (up 7.2%
y-y, up 15.6% q-q) and INR0.7b (down
9.3% y-y, down 17.1% q-q), respectively.
JMC Projects (JMCP IN, Not rated)
reported strong top line of INR4.9b (up
30.1% y-y, up 33.7% q-q).
KPP maintains margins, JMC margins contract
KPP reported standalone EBITDA margin of 11.0%, up 10bps y-y, as the
increase in other expenses (by 370bps) was offset by lower raw material
and sub-contracting costs. Subsidiary JMC Projects reported EBITDA
margin of 7.4%, down 155bps y-y, on rising construction expenses. KPP
reported standalone net profit of INR0.62b (up 7.3% y-y, up 21.3% q-q),
which was higher than our estimate of INR0.58b due to lower-thanexpected
effective tax rate and interest expense.
Backlog to drive strong top-line growth in FY12E
KPP booked orders worth INR9.5b in FY11, driven by order intake of
INR5.4b from PGCIL (PWGR IN). The order intake for JMC Projects was
weak at INR3.0b (down 65.7% y-y), due to intense competition and
management’s decision to avoid margin-dilutive orders. KPP ended the
quarter with a consolidated backlog of INR99.8b (INR54.8b standalone
and INR45b for JMC). KPP’s management guides to top-line growth of
20% standalone and 30-35% for JMC Projects for FY12. The company
expects to maintain margins at current levels since 75% of the order
backlog has a price variation clause.
Reiterate BUY
KPP shares trade at a P/E of 7.8x our FY12 EPS estimates, while its
peers trade at a median P/E of 6.0x on our FY12 EPS estimates. We
reiterate our BUY rating on KPP based on its well-diversified business
mix and top-line growth of 22% in FY12E, driven by current order backlog
of INR99.8b. Our TP of INR181 is based on an average of: 1) P/E-based
SoTP fair value of INR157/share, 2) EV/EBITDA-based SoTP fair value
of INR194/share, 3) P/E-based fair value of INR154/share, based on 10x
FY12E consolidated EPS of INR15.4, and 4) DCF-based fair value of
INR216/share. KPP has already raised funds for its expansion plans,
working capital requirement and BOT projects.
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