InvestmentAuthor D33 BStory published: August 28, Saturday, 2021, 15:42 P.M
Broking firm MK Global is betting on the stock of Kalpataru Power Transmission for a strong return. The company bought Kalpataru stock for a target upward target of Rs 565, as against the closing price of Rs 388 on August 27 (Friday), which means a 44% return from the current level.
The hard possibility of imaginary power
According to MK Global, the company has strong potential in the T&D, railway pipeline. “The proven expertise and track record in the implementation of the EPC project has helped KPTL (SA) win over Rs 1 billion in orders in the last five quarters. “There is a strong potential for future growth behind healthy gains in pipelines and railways, and there are huge opportunities in international railways. HVDC and TBCB are medium-term projects,” MK Global said.
“Our SOTP-based target price is Rs 565 (previously Rs 560) for Rs 516 per share.
KPTL (SA), based on 13.5x Sep’23E Core EPS and Rs 49 per share of JMC project (30% discount on current price).
The underlying PE of the original individual EPC is 9.0 times, which is interesting to our eyes. Excluding JMC projects, Kalpataru Power Transmission traded in the band 10-15 times (5 year average PE 12.5 times and SD 2.5 times). With the sale of transmission assets, the balance sheet will be further improved. In our view, the problems of capital distribution are already diminishing. Overall commitment fell from .31..3% in March ’20 to 2.7%% in August ’21, “the brokerage said.
Record order book
The order book-to-sales ratio of the record high order book (Rs 159 billion excluding L1) is 3.9 times higher, according to MK Global. 44% of the infrastructure space order book, which would enable JMC to sell 20% + CAGR for the next 2-3 years.
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