Robust execution continues… • KPTL :: ICICI Securities, PDF link

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Robust execution continues…
• KPTL continued with robust execution trends in Q2FY15 as revenues
grew 14% to | 1140 crore vs. our estimate of | 1098 crore. During
Q2FY15, 50% of revenues came in from export markets. On a
segmental basis, the transmission & distribution segment grew
21.3% YoY while the infrastructure segment declined 21% YoY. The
management has guided for 12-15% and 15%+ revenue growth in
FY15E and FY16E, respectively
• Robust execution over H1FY15 led to a decline of 18% YoY to | 5500
crore while order inflows in the same period stood at | 1185 crore.
However, the management has guided for | 4000-5000 crore of
inflows in FY15E as KPTL is L1 in order worth | 1600 crore
• Continued losses in the infrastructure segment and higher execution
of international backlog led to margins at 9.1%, which were below
estimates. However, strong execution and a 10% decline in YoY
interest costs led to PAT beat at | 42.7 crore
Well poised to grab opportunities across geographies
During FY10-11, KPTL along with other established players, faced strong
competitive headwinds in the Indian T&D markets as the market share in
PGCIL orders fell from 14% in FY09 to 5% in FY10. Hence, KPTL
diversified into international markets like MENA, Americas and CIS
countries. As a result, as of FY14, international revenue share stood at
>50% whereas international order backlog share stood at 65%. The
share of international backlog has further risen to 67% as of Q2FY15. The
internationalisation drive, thus, helped KPTL clock revenue CAGR of 12%
in FY10-14 vs. domestic companies that faced a challenging economic
environment. However, with PGCIL rationalising competition, KPTL
regained lost market share to 16% in FY14. Going ahead, we expect a
strong backlog of | 7332 crore while steady execution will ensure
revenue CAGR of 15% in FY14-16E to | 5350 crore.
Boasts strong standalone balance sheet, working capital
Unlike other T&D EPC players, KPTL is least affected in terms of leverage
and stretched working capital cycle. Over the last couple of years, KPTL
has managed to keep the standalone debt equity ratio at average of 0.4x
in the last five or six years. Even, going ahead by FY16E, we estimate the
leverage will be at the same levels. One of the key reasons for the same
is more focus on the international markets during stressed times in the
Indian economy, which help it manage the receivable cycle more
efficiently. Debtor days have averaged at 165 days for KPTL in FY08-14.
Subsidiaries may be big boost for KTPL in medium term
KPTL’s subsidiary JMC Projects (67% stake) boasts a strong backlog of |
5100 crore. An improvement in FY15 performance, coupled with a
recovery in domestic economy may give a boost to consolidated PAT &
RoE. On the other hand, the logistics subsidiary has been clocking strong
growth rates coupled with capacity addition (20% YoY revenue growth)
that can be value accretive to KPTL in a three to five year time frame.
Consistent performance deserves upgrade; recommend BUY
KPTL has showcased consistency across financial parameters over FY14-
H1FY15 and further commands strong visibility. Going ahead, we believe
KPTL is in a sweet spot to deliver 15%, 14% revenue, PAT CAGR,
respectively, in FY14-16E. Simultaneously, we expect all subsidiaries like
JMC, Subham Logistics & BOT projects to contribute to performance
over FY15E-17E, which can further lead to better RoEs. Hence, we
upgrade to BUY with a target price of | 213 (SOTP based).

LINK
http://content.icicidirect.com/mailimages/IDirect_KalpataruPower_Q2FY15.pdf