Kalpataru Projects rallied 265% in 25 months; should investors bet on the stock?

Kalpataru Projects International (KPIL), a major player in global power transmission & distribution, railways, oil & gas, and civil infrastructure, has experienced substantial growth in its share value over the past 25 months. During this period, the shares have surged from ₹356 apiece to the current trading price of ₹1,303, delivering an impressive return of 265%.

Domestic brokerage firm HDFC Securities anticipates a sustained upward trend in the stock price, driven by factors such as the company's strong order book, robust financial profile, expanded international footprint, robust demand in the domestic T&D segment, diversified expertise in EPC sectors, extensive global reach, strategic divestment of non-core assets to enhance RoCE, and capability to manage large-scale projects.

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The brokerage firm believes these strengths will enable KPIL to capitalise on significant infrastructure investments, particularly in power transmission, urban mobility, oil & gas, and water sectors in both India and international markets.

Kalpataru Projects offers comprehensive solutions encompassing the design, testing, fabrication, and construction of transmission lines, oil and gas infrastructure, and railway projects on a turnkey basis. The company is a major player in T&D projects, having a global footprint across 73 countries and ongoing projects in 30+ countries.

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Robust order book

According to the brokerage, KPIL's order book is well-diversified across various segments, including transmission, railways, building & factory construction, urban infrastructure, and water.

At the end of FY24, the order book stood at ₹58,415 crore, marking a significant increase of 27.2% compared to FY23. Orders worth ₹30,022 crore (excluding ₹5,000 crore in L1 orders) were secured in FY24, reflecting a 19% increase over FY23. The order book indicates robust visibility, equating to 3.5 times FY24's standalone revenue.

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The company anticipates around ₹50,000 crore in tender opportunities in the domestic T&D market over the next 2–3 years. The B&F business is expected to maintain double-digit growth, supported by a healthy order book and strong visibility in residential and commercial buildings, airports, industrial plants, data centres, and more.

In the oil & gas segment, the brokerage highlighted the company's successful establishment in the Middle East, securing an LOI for a large gas pipeline project. Government capital expenditure is expected to drive urban infrastructure projects.

It also secured two underground metro rail tunnel projects, enhancing its execution capabilities and strengthening its competitive position to effectively handle large-scale projects.

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In the railways segment, the brokerage notes that KPIL is focusing on key areas such as metro electrification, S&T, RRTS, and high-speed rail. Recently, KPIL, along with its JVs and international subsidiaries, secured new orders worth ₹2,333 crore in T&D, EPC, and residential building segments.

More rally ahead?

The brokerage expects KPIL's revenue, EBITDA, and PAT to grow at a CAGR of 24%, 32%, and 53%, respectively, over FY24–26E. It estimates the base case fair value of the stock to be ₹1,346 (17.5x FY26E EPS) and the bull case fair value to be ₹1,461 (19x FY26E EPS) over the next two to three quarters. The bull target price indicates a 12% upside for the stock from its latest closing price.

The brokerage advised investors to buy the stock within the range of ₹1,216–1,240 (16x FY26E EPS) and consider adding more on dips to the ₹1,099–1,121 range (14.5x FY26E EPS).

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"KPIL’s robust order booking driven by T&D and civil, increasing market share in local and international markets, improving growth outlook, strong balance sheet, and NWC give us comfort. The space has enough revenue visibility for the medium term," said HDFC Securities.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.