Kalpataru Power (KPP) Q3FY13 PAT was in line with our estimates
adjusting for forex loss of INR40mn. EBITDA margins declined by 130bps
YoY to 10% mainly due to higher staff cost as a result of increments
accruing in the quarter. It indicated that margins are expected to improve
in the coming quarters. The company recorded an impressive order
inflow of INR9bn (vs INR2.5bn in Q3FY12). The company has maintained
its FY13E revenue guidance of 15% and has issued fresh guidance of 15%
revenue growth for FY14E. We maintain ‘HOLD’.
PAT in line; earnings likely to improve in FY14E
The company recorded 11% revenue growth in Q3FY13. After adjusting for forex loss of
INR 40mn, PAT was in line with our estimates. The company has guided a 15% revenue
growth for FY14E and also maintained 15% revenue growth for FY13E, implying 12‐13%
revenue growth for Q4FY13E. AT JMC, revenue growth was subdued at 6% with
margins declining by 200bps YoY to 4.7%. PAT declined by 70% YoY as a result of higher
interest cost and poor operating performance. The company expects margins to
remain at 5% levels for the next 2‐3 quarters.
Order book up 12 % YoY; FY13E order intake likely to be flat
The company recorded inflows of INR9bn vs INR2bn in Q3FY12. Order book at the end
of Q3FY13 stood at INR 65bn. 70% of the OB is variable price contracts and is split
equally between domestic & international. The order book guidance at the end of FY13
is at INR65‐70bn with order inflows expected to remain at FY12 level (INR 35bn) which
seems achievable as in 9MFY13; the company has achieved inflows worth INR 22bn.
Outlook and valuations: Upside capped; maintain ‘HOLD’
While we expect KPP’s margins to improve by 30‐40bps in FY14E given low margin
order execution in FY13E in T/L, we remain concerned on JMC profitability due to
execution of low margin orders. As a result, we have cut JMC’s margins by 50bps for
FY14E. We have ascribed a higher multiple (6.6x vs 5.4x) to KPP‘s TL business given
improved outlook. However, we maintain ‘HOLD/SP’ on the stock with a target price of
INR94 (earlier INR76) given limited upside from current levels.
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