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Buy Kalpataru Power Transmissions, target price Rs 565: Emkay Global

Emkay Global has buy call on Transmissions with a target price of Rs 565. The current market price of Kalpataru Power Transmissions Ltd. is Rs 389.5.

Time period given by analyst is one year when Kalpataru Power Transmissions price can reach defined target.

Kalpataru Power Transmissions Ltd., incorporated in the year 1981, is a Mid Cap company (having a market cap of Rs 5799.27 Crore) operating in Power sector.

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 3218.00 Crore, down -21.59 % from last quarter Total Income of Rs 4104.00 Crore and up 37.82 % from last year same quarter Total Income of Rs 2335.00 Crore. Company reported net profit after tax of Rs 87.00 Crore in latest quarter.

Investment Rationale
SoTP-based TP of Rs565 (earlier Rs560) comprises Rs516/share for KPTL (SA), based on 13.5x Sep’23E core EPS, and Rs49/share for the stake in JMC projects (30% discount to the current value). The implied PE of the core standalone EPC is 9.0x, which is attractive. KPTL, excluding JMC projects, has traded in a band of 10-15x (5-year av. PE of 12.5x and SD at 2.5x). With the sale of transmission assets, the balance sheet will further improve. Capital allocation issues are already receding. The overall pledge has come down from 31.3% in Mar’20 to 24.7% in Aug’21. Key risks to the call: sustained commodity inflation and execution challenges.

Promoter/FII Holdings
Promoters held 54.6 per cent stake in the company as of June 30, 2021, while FIIs held 7.3 per cent, DIIs 28.4 per cent and public and others 9.8 per cent.

(Disclaimer: Views and recommendations given in this section are the analysts’ own and do not represent those of ETMarkets.com. Please consult your financial adviser before taking any position in the stock/s mentioned.

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