For private circulation only Volume No. I Issue No. 14 Kalpataru Power Transmission Transmitting encouraging signals Price: Rs 98 Target Price: Rs 125 Sensex: 22,340 Nifty: 6,696 FINANCIAL SUMMARY SALES OPM (%) OP OTHER INC. PBIDT INTEREST PBDT DEP. PBT TAX NET PROFIT EPS(RS)* 1503(12P) 4572.4 9.9 452.67 54.25 506.92 162.19 344.73 73.48 271.25 86.8 184.45 12 1403 (12P) 3976 9.4 373.71 51.3 425.01 147.45 277.56 69.98 207.58 66.2 141.28 9.2 1303 (12) 3335.4 9.7 322.08 47.72 369.8 122.01 247.79 52.25 195.54 57.89 137.65 9 1203 (12) 3032.72 10.9 329.25 51.18 380.43 108.25 272.18 48.1 224.08 59.18 164.9 10.7 1103 (12) 2878.18 11.9 343.47 46.95 390.42 87.91 302.51 45.93 256.58 66.02 190.56 12.4 1003 (12) 2632.94 11.6 304.8 33.29 338.09 72.25 265.84 38.24 227.6 57.14 170.46 11.1 * Annualized On Current Equity Of Rs 30.69 Crore. Face Value: Rs 2. Figures in Rs crore Source: Capitaline Databases STOCK DATA BSE Code : 522287 BSE Group : B NSE Code : KALPATPOWR Bloomberg : KPP IN Reuters : KAPT.BO Par Value : Rs 2 52-week High/Low : Rs 98 / Rs 56 Sector : Capital Goods Electrical Equipment SHAREHOLDING PATTERN* Category % of equity Foreign : 10.35 Institutions : 23.20 Corporate Holding : 1.17 Promoters : 59.45 Public & Others : 5.83 Total : 100 * as on 31 st December 2013 Source: Capitaline Databases Kalpataru Power Transmission (KPTL) is a Leading Turnkey Player in Power (Transmission - India and Overseas / Generation / Distribution / Construction), Infrastructure (Oil & Gas Sector / Railways / Building & Factories / Roads & Bridges) and Asset Creation (Transmission System / Roads / Logistics & Warehouse), having footprints across 37 countries. The company is currently executing / supplying to several customers in Africa, the Middle East, Far East, Australia, USA and Canada. Power Grid Corporation of India, State Electricity Boards (SEBs) viz., Gujarat, Karnataka, Maharashtra, Rajasthan, Andhra Pradesh, Orissa, Tamil Nadu, Madhya Pradesh, Chattisgarh and private players such as Adani, Essar etc are some of the leading clients with whom KPTL has worked with. In Infrastructure space, the company has worked with Gas Authority Of India Limited (GAIL), Bharat Petroleum Corporation Limited (BPCL), Gujarat State Petronet Limited (GSPL), Indian Oil Corporation Limited (IOC), Hindustan Petroleum Corporation Limited (HPCL), Engineers India Limited (EIL) etc. KPTL an annual installed capacity in excess of 180,000 MT of galvanized steel towers. It was the first Indian company to be ISO 9001 certified in the transmission industry. Kalpataru Power owns three large Fabrication plants for galvanized steel towers equipped with modern machineries (more than a dozen CNC machines) and automated temperature controlled galvanizing baths, besides its state-of-the-art Testing Station and R & D Centre. In addition to trained workmen at the plant and construction sites, the Company has a competent resource of more than 2,000 managers and staff including a full-fledged Design / Engineering Department with more than 60 qualified engineers using PLS Tower, i-tower, STADD, PLSCADD, BOCAD, AUTOCAD facilities. The company has a subsidiary JMC Projects with 67% stake which is into civil construction, construction of plants for industries such as power, automobiles, textiles and pharmaceuticals, commercial, office and residential complexes, hospitals and hotels. The company s infrastructure contracts include road projects, bridges and bus terminals besides the power segment. Shree Shubham Logistics in which the company has around 85% stake is into warehousing business management and has a storage capacity of more than 1.1 Million ton operating in more than 12 States. Core Transmission and Distribution (T&D) continues to be in good shape For the first 9 months of FY 14, the transmission business reported net sales growth of 33% to Rs 2720.41 crore and segmental PBIT stood at Rs 259.25 crore, up by 42% YoY.
Power Grid share as a % of total execution stood around 20%, which at one point in time was hovering around 35%. The international business as a % to total share is hovering around 50% which at one point in time was hovering around 25%. During the slowdown in ordering and in execution at domestic level, the management was able to grab the orders from international markets and thus was having sufficient orders for execution in any quarters. Thus, the core business of transmission and distribution remained unaffected, though domestic and international share as a % of total revenue changed due to lack of pie in domestic market and increase of ordering pie at the international markets. Qatar, Bahrain and other Middle East countries and countries such as Nigeria, Uganda, and Tunisia etc are some of the countries where the company have order book from. At international markets, the company is working with a local partner in every contract that it wins. The civil work is by and large undertaken through the local partner under the supervision of KPTL. This increases the agency commission costs for the company. However the international orders are having margins better than the domestic contracts and thus overall, still the company after deducting such commission, ends up with operating margin of around 10%. Infrastructure segment is hurting the overall margins and profits For the first 9 months of FY 14, the infrastructure segment reported net sales of Rs 138.48 crore, down by 36%, while at PBIT level; the segment reported a loss of Rs 36.48 crore, as compared to a profit of Rs 5.45 crore on YoY basis. The segment comprises of orders from pipeline and railways business. The company entered into the business and grabbed contracts in railways and pipeline business, with a penetration policy so as to get the eligibility for future large contracts. Unfortunately, the delay in execution and ROW clearances and thus increase in working capital requirements have resulted in these low margin contracts incurring losses. These low margin or legacy orders will continue for 2 more quarters and by Q2 FY 15, the book will be free. Moreover there is nothing to bid for Railways and Pipeline orders as nothing is coming on the table to bid, due to lack of funds from railways and delay in awarding the pipeline contracts. The company has current order book position of about Rs 420 crore, of which about 80% are legacy and low margin orders. Also most of the pipeline orders are from Eastern region, where high and extended rainfall has lead to delays in execution. Strong order book at group level and subsidiaries financials are improving KPTL has an order book position of about Rs 7000 crore as on Dec 13, which was mostly flat on YoY basis. About 54% of order book of Transmission business was from international markets. Also about 50% of total revenue in Dec'13 quarter was also from international business. Transmission order execution was as planned and international orders helped in better and higher margins. JMC Project's order book stood at Rs 5500 crore as on Dec 13. JMC received new order worth Rs 880 crore in Q3 FY'14. About 50% of this order book is from Government contracts and rests are private. Most of the old low margin orders of JMC are being executed and the current order book position has a better margin visibility. KPTL has order book position of Rs 7000 crore as on Dec 13. About 54% of order book of Transmission business was from international markets. Also about 50% of total revenue in Dec'13 quarter was also from international business. Transmission order execution was as planned and international orders helped in better and higher margins Within power and infrastructure space, transmission line tower segment is the only segment which is growing reasonably well and has some visibility. It is also better placed in terms of tapping international market as most companies in this segment are wellestablished overseas 2
Shubham logistics is operating at about 80% utilization capacity and has capacity now of more than 1.1 Million Ton of warehousing storage. The company broke even last year and is already running in profits. It has now presence in Gujarat, Rajasthan, and MP and now getting into Maharashtra and couple of other states in next 12 months. The Thane realty project is nearly completed and work on Indore Residential project is full which will be completed in FY 15. Thus cash inflows will happen in FY 15. Thus at consolidated level, KPTL will generate higher sales and better bottom line in FY 15. Financials will improve Kalpataru Power Transmission reported an 18% growth in standalone net sales to Rs 1051.34 crore. OPM was down by 110 bps to 8.9%. Thus overall OP was up by 6% to Rs 94.04 crore. Other income was up by 4% to Rs 10.34 crore. Interest was up by about 1% to Rs 35.01 crore and depreciation was up by 34% to Rs 18.09 crore, after which the PBT was up by 2% to Rs 51.28 crore. After providing total tax of Rs 17.38 crore, up by 16% YoY, standalone PAT for Dec'13 quarter was down by 4% to Rs 33.70 crore. Kalpataru Power Transmission reported a 26% growth in standalone net sales to Rs 2903.14 crore for the nine months ended Dec'13 period. OPM was down by 30 bps to 9.5%. Thus overall OP was up by 23% to Rs 277.15 crore. Other income was up by 10% to Rs 37.80 crore. Interest was up by about 24% to Rs 114.26 crore and depreciation was up by 35% to Rs 51.33 crore, after which the PBT was up by 16% to Rs 149.36 crore. After providing total tax of Rs 50 crore, up by 25% YoY, standalone PAT for nine months ended Dec'13 was up by 12% to Rs 99.36 crore. Valuation In FY 2014 we expect the company to register sales and net profit of Rs 3976 crore and Rs 141.28 crore respectively. EPS works out to Rs 9.2. With Infrastructure segment s legacy orders coming to an end by Q1 FY 15, there will not be any more losses in infrastructure segment in FY 15, thus boosting overall PBIT by Rs 45 crore. Further, the execution of international T&D order book will result in better revenues and profits in FY 15. We expect net sales and PAT of Rs 4572.40 crore and Rs 184.45 crore respectively, giving an EPS of Rs 12 for FY 2015. At current market price of Rs 98, the stock is trading at 8.2 times its FY 15 earnings. Within power and infrastructure space, transmission line tower segment is the only segment which is growing reasonably well and has some visibility. It is also better placed in terms of tapping international market as most companies in this segment are well-established overseas. Currently fears about the government s fluid policies in power sector and locking up of funds with SEBs are driving down valuations of companies like KPTL. Once these fears settle down and power sector regains confidence, transmission line tower segment will be the major gainer and KPTL will be a leading beneficiary. Moreover pipeline and railways segments are already going through the worst and any recovery in these segments will be additional positive. Stake sale in Shubham logistics and cash flows from the two real estate projects are other medium term positive triggers. Accumulate with a medium-term price target of Rs 125. Pipeline and railways segments are already going through the worst and any recovery in these segments will be additional positive. Stake sale in Shubham logistics and cash flows from the two real estate projects are other medium term positive triggers With Infrastructure segment s legacy orders coming to an end by Q1 FY 15, there will not be any more losses in infrastructure segment in FY 15, thus boosting overall PBIT by Rs 45 crore. Further, the execution of international T&D order book will result in better revenues and profits in FY 15 3
KALPATARU POWER TRANSMISSION: STANDALONE RESULTS 1312 (3) 1212 (3) VAR. (%) 1312 (9) 1212 (9) VAR. (%) 1303 (12) 1203 (12) VAR. (%) Sales 1051.34 889.67 18 2903.14 2303.80 26 3335.40 3032.72 10 OPM (%) 8.9 10.0 9.5 9.8 9.7 10.9 OP 94.04 88.58 6 277.15 224.82 23 322.08 329.25-2 Other inc. 10.34 9.95 4 37.80 34.26 10 47.72 51.18-7 PBIDT 104.38 98.53 6 314.95 259.08 22 369.80 380.43-3 Interest 35.01 34.73 1 114.26 91.84 24 122.01 108.25 13 PBDT 69.37 63.80 9 200.69 167.24 20 247.79 272.18-9 Dep. 18.09 13.47 34 51.33 38.12 35 52.25 48.10 9 PBT 51.28 50.33 2 149.36 129.12 16 195.54 224.08-13 Current Tax 17.58 15.20 16 50.00 40.10 25 57.89 59.18-2 PAT 33.70 35.13-4 99.36 89.02 12 137.65 164.90-17 EPS (Rs)* # # # # 9.0 10.7 * EPS is on current equity of Rs 30.69, of face value of Rs 2 each. # EPS is not annualised due to seasonality of business. Figures in Rs crore. Var. (%) exceeding 999 has been truncated to 999. Source: Capitaline Corporate Database 4
Sales KALPATARU POWER TRANSMISSION: SEGMENT RESULTS 1312 1212 VAR. % TO 1312 1212 VAR. % TO 1303 1203 VAR. % TO (3) (3) (%) TOTAL (9) (9) (%) TOTAL (12) (12) (%) TOTAL Transmission 1007.22 803.24 25 96 2720.41 2047.82 33 94 2956.93 2640.52 12 89 Infrastructure EPC 28.05 71.27-61 3 138.48 216.99-36 5 324.36 338.75-4 10 Others 16.07 15.16 6 2 44.25 38.99 13 2 54.11 53.45 1 2 Total 1051.34 889.67 18 100 2903.14 2303.80 26 100 3335.40 3032.72 10 100 Add: Other unallocable inc 0.00 0.00 0.00 0.00 0.00 0.00 Net sales 1051.34 889.67 2903.14 2303.80 3335.40 3032.72 PBIT Transmission 89.51 73.00 23 118 259.25 182.64 42 115 270.97 263.25 3 100 Infrastructure EPC -15.23 0.05 PL -20-36.48 5.45 PL -16-1.26 19.25 PL 0 Others 1.80 2.02-11 2 3.49 0.47 643 2 1.89 3.38-44 1 PBT before tax & int. 76.08 75.07 1 100 226.26 188.56 20 100 271.60 285.88-5 100 Less: Interest 35.01 34.73 114.26 91.84 122.01 108.25 Add: Other unallocable income (net) 10.21 9.99 37.26 32.40 45.95 46.45 PBT 51.28 50.33 2 149.26 129.12 16 195.54 224.08-13 Capital Employed Transmission 1529.06 1497.41 2 57 1529.06 1497.41 2 57 1237.24 1084.94 14 51 Infrastructure EPC 305.40 374.96-19 14 305.40 374.96-19 14 365.38 324.86 12 15 Others 52.15 72.27-28 2 52.15 72.27-28 2 62.25 85.16-27 3 Unallocable 786.93 729.73 8 27 786.93 729.73 8 27 777.45 726.35 7 32 Total CE 2673.54 2674.37 0 100 2673.54 2674.37 0 100 2442.32 2221.31 10 100 Figures in Rs crore. LP: Loss to Profit. PL: Profit to Loss Source: Capitaline Corporate Database 5
FINANCIAL STATEMENT PROFIT & LOSS A/C-STANDALONE - RS. CRS FY09 FY10 FY11 FY12 FY13 Net Sales 1867.47 2622.41 2860.04 3009.78 3301.36 Y-o-Y 40.4% 9.1% 5.2% 9.7% Total Expenditure 1748.94 2268.87 2466.61 2627.84 3116.47 Raw Materials 1073.31 1144.81 1276.8 1488.58 1649.17 Stock Adjustments 51.78-10.4-12.54-14.34 80.08 Power & Fuel Cost 6.51 6.13 6.83 8.68 11.12 Employee Cost 100.87 157.1 187.06 170.23 200.64 Other Manufacturing Expenses 413.94 798.12 833.51 775.62 909.14 Selling and Administration Expenses 63.85 170.12 164.9 172.91 247.79 Miscellaneous Expenses 38.68 2.99 10.05 26.16 18.53 EBIDTA 170.31 343.14 380.89 367.6 264.97 Margin 6.3% 13.5% 13.8% 12.7% 5.6% Depreciation 27.32 38.24 45.93 48.1 52.25 EBIT 142.99 304.9 334.96 319.5 212.72 Interest 105.59 118.88 112.79 132.25 144.97 Other Income 31.4 51.98 46.95 51.18 47.72 PBT 120.58 227.6 256.58 224.09 195.55 Tax 21.9 55.86 69.43 60.03 55.9 Fringe Benefit tax 1.19 0 0 0 0 Deferred Tax 3.08 1.28-3.41-0.85 2 PAT 94.41 170.46 190.56 164.91 137.65 Extraordinary Items -0.04 0.69 0.23-0.15 0.08 Adjusted PAT 94.45 169.77 190.33 165.06 137.57 Margin 5.1% 6.5% 6.7% 5.5% 4.2% EPS (Rs.) 34.35 63.09 12.2 10.54 8.76 CASH FLOW (Rs in crore) FY09 FY10 FY11 FY12 FY13 Cash Flow Summary Cash and Cash Equivalents at Beginning of the year 33.88 40.38 33.39 45.83 80.64 Net Cash from Operating Activities -196.36 350.64 282.56 156.16 186.47 Net Cash Used in Investing Activities -27.6-198.83-449.58-21.34-207.82 Net Cash Used in Financing Activities 230.46-158.8 179.46-100.01-14.94 Net Inc/(Dec) in Cash and Cash Equivalent 6.5-6.99 12.44 34.81-36.29 Cash and Cash Equivalents at End of the year 40.38 33.39 45.83 80.64 44.35 Year 2009 2010 2011 2012 2013 6
BALANCE SHEET (Rs in crore) FY09 FY10 FY11 FY12 FY13 SOURCES OF FUNDS : Share Capital 26.5 26.5 30.69 30.69 30.69 Reserves Total 810.45 961.56 1560.38 1712.22 1815.65 Total Shareholders Funds 836.95 988.06 1591.07 1742.91 1846.34 Secured Loans 485.44 512.6 362.92 301.75 522.61 Unsecured Loans 169.27 91.72 89.5 170.37 68.44 Total Debt 654.71 604.32 452.42 472.12 591.05 Other Liabilities 0 0 53.83 62.83 67.6 Total Liabilities 1491.66 1592.38 2097.32 2277.86 2504.99 APPLICATION OF FUNDS : Gross Block 359.09 471.26 538.54 623.15 812.19 Less : Accumulated Depreciation 100.69 136.33 179.19 229.42 281.48 Net Block 258.4 334.93 359.35 393.73 530.71 Capital Work in Progress 9.99 3.55 14.63 59.15 7.93 Investments 126.83 126.51 395.58 404.94 335.07 Current Assets, Loans & Advances Inventories 236.89 268.92 241.04 321.15 443.97 Sundry Debtors 977.15 1322.13 1348.26 1513.39 1287.9 Cash and Bank 44.52 36.87 144.26 103.4 56.9 Loans and Advances 667.1 757.03 548.2 693.57 898.93 Total Current Assets 1925.66 2384.95 2281.76 2631.51 2687.7 Less : Current Liabilities and Provisions Current Liabilities 721.43 1115.88 1281.32 1534.15 1567.88 Provisions 94.99 127.6 96.54 79.11 74.73 Total Current Liabilities 816.42 1243.48 1377.86 1613.26 1642.61 Net Current Assets 1109.24 1141.47 903.9 1018.25 1045.09 Miscellaneous Expenses not written off 0 0 0 0 0 Deferred Tax Assets 1.66 1.92 1.82 3.46 0 Deferred Tax Liability 14.46 16 12.49 13.28 11.01 Net Deferred Tax -12.8-14.08-10.67-9.82-11.01 Other Assets 0 0 434.53 411.61 597.2 Total Assets 1491.66 1592.38 2097.32 2277.86 2504.99 Contingent Liabilities 77.07 87.66 181.93 132.39 214.63 7
RATIO ANALYSIS FY09 FY10 FY11 FY12 FY13 Key Ratios Debt-Equity Ratio 0.61 0.69 0.41 0.28 0.30 Long Term Debt-Equity Ratio 0.14 0.23 0.17 0.11 0.10 Current Ratio 1.48 1.48 1.42 1.38 1.34 Turnover Ratios Fixed Assets 5.85 6.46 5.83 5.33 4.77 Inventory 9.80 10.59 11.52 11.00 8.94 Debtors 2.35 2.33 2.20 2.16 2.44 Total Asset Turnover Ratio 1.48 1.74 1.59 1.41 1.43 Interest Cover Ratio 2.14 2.91 3.27 2.69 2.35 PBIDTM (%) 13.25 14.36 14.13 13.08 11.48 PBITM (%) 11.82 12.94 12.57 11.52 9.95 PBDTM (%) 7.73 9.93 10.29 8.80 7.24 CPM (%) 6.36 7.79 8.05 6.89 5.55 APATM (%) 4.93 6.36 6.48 5.33 4.02 ROCE (%) 17.50 22.48 20.03 16.29 14.24 RONW (%) 11.77 18.69 14.78 9.89 7.67 Payout (%) 21.83 13.77 12.30 14.23 17.12 Disclaimer : This document has been prepared by M/s Latin Manharlal Securities Pvt. Ltd. and Capital Market Publishers India Pvt. Ltd. (the company) and is being distributed in India by Latin Manharlal Securities Pvt. Ltd. The information in the document has been compiled by the research department. Due care has been taken in preparing the above document. However, this document is not, and should not be construed, as an offer to sell or solicitation to buy any securities. Any act of buying, selling or otherwise dealing in any securities referred to in this document shall be at investor s sole risk and responsibility. This document may not be reproduced, distributed or published, in whole or in part, without prior permission from the Company. Copyright 2009 - Capital Market Publishers India Pvt. Ltd and Latin Manharlal Securities Pvt. Ltd. 8