RESULTS REVIEW 1QFY17

16 AUG 2016

Kalpataru Power Transmission

BUY
INDUSTRY

CAPITAL GOODS

CMP (as on 16 Aug 2016)

Rs 258

Target Price

Rs 330

Nifty

8,643

Sensex

28,065

KEY STOCK DATA

Bloomberg /Reuters

KPP IN

No. of Shares (mn)

153

MCap (Rs bn) / ($ mn)

40/593

6m avg traded value (Rs mn)

28

STOCK PERFORMANCE (%)

52 Week high / low

Rs 285 / 160

3M

6M

12M

Absolute (%)

18.7

45.5

(3.6)

Relative (%)

8.6

26.3

(3.6)

SHAREHOLDING PATTERN (%)

Promoters

51.45

FIs & Local MFs

22.74

FIIs
Public & Others
Source : BSE

Pawan Parakh, CFA

pawan.parakh@hdfcsec.com
+91-22-6171-7314

7.35
10.46

Order flow boost continues

Kalpataru Powers (KPP) 1QFY17 revenue (-1% YoY)
was marginally below our estimates, however better
margins (11.3%, +90bps YoY) and lower interest
expense (-40% YoY) led to an inline PAT (Rs 645mn,
+33% YoY). Order inflows at Rs 19.6bn (+25% YoY)
continue to be robust, leading to a strong order book
of Rs 91bn (+77% YoY). KPP is further L1 in orders
worth Rs 20bn.
Despite a muted revenue performance in 1QFY17,
KPPs order book indicates substantial growth
visibility ahead. Improving prospects on railway
capex provides us further comfort on the growth
potential of KPP over the longer run. We believe the
recovery in the standalone business significantly
overweighs the concerns on capital misallocation
(loss funding in subsidiaries). We reiterate our BUY
rating on the stock with a SOTP-based TP is Rs
330/share (SA EPC contributes Rs 262/share, valued
at 15x FY18E EPS

Highlights of the quarter

The management stated that the muted revenue

performance was on account of (a) lower order

intake in H1FY16 and (b) decline in commodity
prices. However with the strong order backlog, it is
confident of ~20% revenue growth in FY17E.
JMC reported a decline in revenues (-4% YoY) as
execution was impacted due to labour issues in
South India. However, the company is confident of
5-10% growth, with 50bps margin improvement to
~9% in FY17E. Toll collection improved marginally
(~Rs 5.2mn/day), however continues to be below
the breakeven level. A negative WPI for FY16
restricted any tariff increase for the BOT projects.
Losses continue in Shubham (Rs 177mn in 1QFY17)
as it is still in the process of rebuilding its team.
KPP infused Rs 700mn in Q1FY17, thereby
increasing its stake to 80% in Shubham.
Near-term outlook: We have a positive bias given
the strong order flow momentum. Reiterate BUY.

Financial Summary
(Rs mn)
Net Sales
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)

1QFY17
11,537
1,308
645
4.2

1QFY16
11,635
1,150
430
2.8

YoY (%)
-1
14
50
50

4QFY16 QoQ (%)

13,805
-16
1,443
-9
720
-10
4.7
-10

FY14
40,518
3,828
1,429
9.3
27.9
12.3
7.5

FY15
44,211
4,256
1,645
10.7
24.3
11.5
8.2

FY16
43,646
4,669
1,995
13.0
20.0
9.5
9.2

FY17E
51,784
5,420
2,372
15.5
16.8
8.8
10.0

FY18E
58,553
6,112
2,679
17.5
14.9
7.9
10.3

Source: Company, HDFC sec Inst Research

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

KALPATARU POWER TRANSMISSION: RESULTS REVIEW 1QFY17

Quarterly Financials (Standalone)

Revenue performance was
muted on account of decline in
commodity prices and lower
order intake in H1FY16

(Rs mn)
Net Sales
Material Expenses
Employee Expenses
Other Operating Expenses
EBITDA
Interest Cost
Depreciation
Other Income
PBT
Tax
APAT
E/o (Adj For Tax)
Reported PAT

1QFY17
11,537
8,191
724
1,314
1,308
249
195
123
988
343
645
0
645

1QFY16
11,635
8,216
782
1,487
1,150
427
208
141
657
226
430
0
430

YoY (%)
-1

QoQ (%)
-16

50

4QFY16
13,805
10,084
726
1,553
1,443
241
208
121
1,114
394
720
0
720

FY15
44,211
30,839
3,136
5,980
4,256
1,409
852
522
2,517
873
1,645
0
1,645

YoY (%)
-1

-10

FY16
43,646
30,655
2,932
5,390
4,669
1,275
837
508
3,065
1,070
1,995
0
1,995

1QFY17

1QFY16

YoY (%)

4QFY16

QoQ (%)

FY16

FY15

YoY (%)

71.0

70.6

38

73.0

-205

70.2

69.8

48

6.3

6.7

-44

5.3

102

6.7

7.1

-38

11.4

12.8

-139

11.2

15

12.3

13.5

-118

11.3
5.6
34.7

9.9
3.7
34.5

145
190

10.4
5.2
35.4

89
38

10.7
4.6
34.9

9.6
3.7
34.7

107
85

14

-12

50

-9

-10

10

-3

21
21

Source: Company, HDFC sec Inst Research

Margin Analysis
EBTIDA margins surprised
positively in 1QFY17. However
the management expects
margins to remain at ~10.5%
levels on an annual basis.

Material Expenses As % Of Net

Sales
Employee Expenses As % Of Net
Sales
Other Operating Expenses As % Of
Net Sales
Operating Margin (%)
Net Profit Margin (%)
Tax Rate (%)
Source: Company, HDFC sec Inst Research

Page | 2

KALPATARU POWER TRANSMISSION: RESULTS REVIEW 1QFY17

10.0%

6,000
4,000

0.0%
-10.0%

10

-30.0%

-40.0%

Source : Company, HDFC sec Inst Research

200%
100%
0%

-100%

-200%

Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17

2,000

300%

20
15

-20.0%

400%

25

Q1FY17

8,000

500%

Q4FY16

20.0%

Rs bn

Q3FY16

30.0%

10,000

30

Growth (YoY) - RHS

Q2FY16

40.0%

12,000

Order Inflow

Q1FY16

50.0%

Q4FY15

Rs mn

Q2FY15

Order inflows at Rs 19.6bn

(+25% YoY) led to a strong
growth in order book to Rs
91bn (+77% YoY)

14,000

Order Inflows Continue To Remain Robust

Growth (YoY) - RHS

Q1FY15

Revenue

Q3FY15

Execution lagged in 1QFY17, but expected to improve

Source : Company, HDFC sec Inst Research

Key Assumptions and Estimates

There exist upsides to our FY18
estimates as we factor in
order inflows of Rs 67bn in
FY17, lower than
managements expectation.

Rs mn
Order infow
YoY (%)
Revenue
T&D
Infrastructure division (Pipe + Railway)
Biomass energy
EBITDA
EBITDA margins (%)
PAT
Net margin (%)
Capex
Debt
NWC (ex-cash) as % of sales

FY15
30,715
-19.0
44,927
40,326
3,186
700
4,256
9.6
1,645
3.7

FY16
75,186
144.8
44,714
37,368
5,590
662
4,669
10.7
1,995
4.6

FY17E
67,345
-10.4
52,572
43,299
7,713
772
5,420
10.5
2,372
4.6

FY18E
70,712
5.0
59,748
45,609
12,137
807
6,112
10.4
2,679
4.6

433
9,714
34.8

444
5,586
27.0

800
9,086
31.5

800
10,086
31.5

Source: Company, HDFC sec Inst Research

Page | 3

KALPATARU POWER TRANSMISSION: RESULTS REVIEW 1QFY17

SOTP Valuation
We value the standalone EPC
business at 15x FY18 P/E,
thereby arriving at our SOTP
based TP of Rs 330/share

Valuation
Methodology
15x FY18E P/E

KPP standalone
BOT Projects
Jhajjar
Satpura

100%

Value per share

(Rs)
262

51%
100%

10
5
5
26
16
10

Stake

FCFE, COE@13%
FCFE, COE@13%

1,588
795

1x P/B
1x P/B

3,943
2,467
1,476

1.00
1.00

CMP; 30% holdco disc

0.6x P/B

8,059
1,368

67%
80%

Real estate
Indore
Thane
Subsidary
JMC Projects
Shubham Logistics
Target price

Valuation
(Rs mn)
40,187

32
25
7
330

Source : HDFC sec Inst Research

Peer Valuation
Company
Crompton Greaves
Cummins India
Inox Wind
Kalpataru Power *
KEC International
L&T
Suzlon Energy
Techno Electric
Thermax
Triveni Turbine
Voltas

MCap
(Rs bn)

CMP
(Rs)

Rating

TP
(Rs)

54
249
40
40
36
1,402
99
38
102
41
123

86
899
182
258
139
1,505
16
658
853
124
371

BUY
BUY
BUY
BUY
BUY
NEU
BUY
BUY
SELL
BUY
NEU

76
940
475
330
160
1,444
28
677
686
128
325

Adj. EPS (Rs/sh)

FY16E FY17E FY18E
2.1
3.2
4.3
27.1
28.3
31.4
20.4
24.5
31.5
13.0
15.5
17.5
7.4
9.8
10.6
50.8
60.4
70.3
-0.3
1.0
2.0
24.7
31.2
37.8
23.1
26.4
27.4
3.3
3.7
4.3
10.4
13.2
15.2

FY16E
41.5
33.1
8.9
19.8
18.6
29.6
-48.0
26.6
36.9
38.0
35.5

P/E (x)
FY17E
26.8
31.8
7.4
16.7
14.2
24.9
16.2
21.1
32.3
33.5
28.1

FY18E
20.2
28.7
5.8
14.8
13.1
21.4
8.1
17.4
31.2
29.0
24.3

EV/EBITDA (x)
FY16E FY17E FY18E
15.9
11.1
10.0
32.3
29.8
26.2
7.2
5.0
4.0
9.4
8.8
7.9
8.5
7.3
6.9
13.1
12.5
11.4
14.5
9.9
7.3
17.9
12.7
10.8
21.2
20.0
17.8
23.7
20.5
17.5
26.7
21.5
18.2

FY16E
2.9
24.8
27.9
9.2
13.5
11.1
2.4
12.2
12.2
41.3
15.3

ROE (%)
FY17E
4.2
22.5
25.8
10.0
15.5
12.2
-10.1
16.6
12.8
36.9
17.1

FY18E
5.5
23.6
26.7
10.3
14.7
13.0
-27.6
17.4
12.2
33.9
17.4

Source : Company, HDFC sec Inst Research

*Note - represent SA numbers

Page | 4

KALPATARU POWER TRANSMISSION: RESULTS REVIEW 1QFY17

Income Statement
(Rs mn)
Net Revenues
Growth (%)
Material Expenses
Employee Expenses
Other Expenses
Total Expenses
EBIDTA
EBIDTA %
EBIDTA Growth %
Depreciation
EBIT
Other Income (Including EO
Items)
Interest
PBT
Tax
RPAT
EO (Loss) / Profit (Net Of Tax)
APAT
APAT growth %
Adjusted EPS (Rs)
EPS growth %

Balance Sheet
FY14
40,518
21.6
29,077
2,602
5,011
36,690
3,828
9.4
19.6
695
3,133

FY15
44,211
9.1
30,839
3,136
5,980
39,955
4,256
9.6
11.2
852
3,404

FY16
43,646
(1.3)
30,655
2,932
5,390
38,977
4,669
10.7
9.7
837
3,832

FY17E
51,784
18.6
36,378
3,518
6,468
46,363
5,420
10.5
16.1
877
4,543

FY18E
58,553
13.1
41,133
3,870
7,438
52,441
6,112
10.4
12.8
913
5,199

484

522

508

515

526

1,460
2,157
727
1,429
1,429
5.5
9.3
5.5

1,409
2,517
873
1,645
1,645
15.1
10.7
15.1

1,275
3,065
1,070
1,995
1,995
21.3
13.0
21.3

1,464
3,594
1,222
2,372
2,372
18.9
15.5
18.9

1,665
4,059
1,380
2,679
2,679
13.0
17.5
13.0

Source: Company, HDFC sec Inst Research

(Rs mn)
SOURCES OF FUNDS
Share Capital
Reserves
Total Shareholders Funds
Minority Interest
Long-term Debt
Short-term Debt
Total Debt
Deferred Taxes
Long-term Provisions &
Others
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP
Investments
LT Loans & Advances
Inventories
Debtors
Other Current Assets
Cash & equivalents
Total Current Assets
Creditors
Other Current Liabilities &
Provns
Total Current Liabilities
Net Current Assets
TOTAL APPLICATION OF
FUNDS

FY14

FY15

FY16P

FY17E

FY18E

307
19,235
19,542
677
7,173
7,850
138

307
20,401
20,708
2,943
6,771
9,714
54

307
22,279
22,586
2,716
2,870
5,586
(4)

307
24,381
24,688
3,216
5,870
9,086
(4)

307
26,791
27,098
3,716
6,370
10,086
(4)

891

978

209

849

960

28,420

31,454

28,377

34,620

38,141

5,738
180
8,243
716
5,438
16,343
8,655
647
31,082
16,718

5,535
54
8,733
764
5,989
18,705
7,409
753
32,855
15,359

5,384
41
9,909
997
4,244
19,999
7,375
1,062
32,681
17,724

4,549
800
10,859
989
5,675
22,700
9,652
1,247
39,274
19,862

4,436
800
11,859
1,348
6,417
25,667
10,684
1,637
44,404
22,459

821

1,129

2,913

1,988

2,248

17,539
13,543

16,489
16,367

20,637
12,044

21,850
17,423

24,706
19,698

28,420

31,454

28,376

34,620

38,141

Source: Company, HDFC sec Inst Research

Page | 5

KALPATARU POWER TRANSMISSION: RESULTS REVIEW 1QFY17

Cash Flow
(Rs mn)
Reported PBT
Non-operating & EO items
Interest
Depreciation
Working capital change
Tax Paid
Other operating items
OPERATING CASH FLOW (a)
Capex
Free Cash Flow
Investments
Non-operating Income
INVESTING CASH FLOW (b)
Debt Issuance/(Repaid)
Interest
FCFE
Dividend
FINANCING CASH FLOW (c)
NET CASH FLOW (a+b+c)
Reported PBT
Closing cash

Key Ratios
FY14
2,157
(484)
1,460
695
(3,500)
(727)
382
(17)
(707)
(724)
(485)
484
(708)
2,527
(1,460)
343
(264)
803
78
647
2,157

Source: Company, HDFC sec Inst Research

FY15
2,517
(522)
1,409
852
(2,678)
(873)
(768)
(62)
(433)
(495)
(104)
522
(14)
1,864
(1,409)
(40)
(272)
182
106
753
2,517

FY16P
3,065
(508)
1,275
837
3,629
(1,070)
(289)
6,939
(444)
6,494
(1,013)
508
(949)
(4,128)
(1,275)
1,092
(277)
(5,680)
310
1,062
3,065

FY17E
3,594
(515)
1,464
877
(4,545)
(1,222)
(347)
(800)
(1,147)
(950)
515
(1,235)
3,500
(1,464)
889
(269)
1,766
185
1,247
3,594

FY18E
4,059
(526)
1,665
913
(2,133)
(1,380)
2,599
(800)
1,799
(1,000)
526
(1,274)
1,000
(1,665)
1,134
(269)
(935)
390
1,637
4,059

PROFITABILITY %
GPM
EBITDA margin
APAT margin
RoE
Core RoCE
RoCE
EFFICIENCY
Tax rate %
Fixed Asset Turnover (x)
Inventory (days)
Debtors (days)
Payables (days)
Cash Conversion Cycle (days)
Debt/EBITDA (x)
Net D/E (x)
Interest Coverage (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
Book Value
VALUATION
P/E
P/BV
EV/EBITDA
EV/Revenues
OCF/EV (%)
FCF/EV (%)
FCFE/MCAP (%)
Dividend yield (%)

FY14

FY15

FY16P

FY17E

FY18E

28.2
9.4
3.5
7.5
11.7
9.6

30.2
9.6
3.7
8.2
10.7
9.1

29.8
10.7
4.6
9.2
12.7
9.4

29.8
10.5
4.6
10.0
15.0
10.9

29.8
10.4
4.6
10.3
14.6
11.1

33.7
6.8
49.0
147.2
150.6
45.6
2.1
0.4
2.1

34.7
7.9
49.4
154.4
126.8
77.1
2.3
0.4
2.4

34.9
8.0
35.5
167.3
148.2
54.5
1.2
0.2
3.0

34.0
9.7
40.0
160.0
140.0
60.0
1.7
0.3
3.1

34.0
11.2
40.0
160.0
140.0
60.0
1.7
0.3
3.1

9.3
13.8
1.5
127.3

10.7
16.3
1.5
134.9

13.0
18.5
1.5
147.2

15.5
21.2
1.5
160.9

17.5
23.4
1.5
176.6

27.7
2.0
12.2
1.2
(0.0)
(1.5)
0.9
0.6

24.1
1.9
11.4
1.1
(0.1)
(1.0)
(0.1)
0.6

19.8
1.8
9.4
1.0
15.7
14.7
2.8
0.6

16.7
1.6
8.8
0.9
(0.7)
(2.4)
2.2
0.6

14.8
1.5
7.9
0.8
5.4
3.7
2.9
0.6

Source: Company, HDFC sec Inst Research

Page | 6

KALPATARU POWER TRANSMISSION: RESULTS REVIEW 1QFY17

RECOMMENDATION HISTORY
Kalpataru Power

TP

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

350
330
310
290
270
250
230
210
190
170
150

Date

CMP

Reco

Target

13-May-16
30-May-16
16-Aug-16

217
227
258

BUY
BUY
BUY

297
330
330

Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Page | 7

KALPATARU POWER TRANSMISSION: RESULTS REVIEW 1QFY17

Disclosure:
I, Pawan Parakh, CFA, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject
issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
Disclaimer:
This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or
arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of
warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information
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