Prashant Jain’s HDFC Mutual Fund bought 17,82,000 shares of Kalpataru Power Transmission a few days ago at about Rs. 230 per share.
To understand what is so alluring about Kalpataru Power Transmission, we have to turn to Daljeet’s detailed research report on the subject. Daljeet puts it in clear and simple terms:
“Kalpataru Power Transmission Ltd. (KPTL) is part of Kalpataru group and is a leading turnkey player in Power, Infrastructure and Asset Creation (Transmission systems / Roads / Logistics & Warehouse) having footprints across 38 countries. Company has 67.2% stake in JMC Projects which is in the business of civil construction of residential/ commercial buildings and road projects. Company also has 70% stake in Shree Shubham Logistics, which is leading player in agrologistics business.
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Valuation and Outlook:
We expect KPTL (standalone) revenue to increase by CAGR 12.4% between FY14-17E. As domestic transmission order and execution picks up and company’s infrastructure segment breaks-even in FY16E, we expect company to steadily improve its EBITDA margin from 9.5% in FY14 to 10.6% in FY17E.
We have used sum of the parts (SOTP) methodology to value KPTL on consolidated basis. KPTL standalone is valued on EV/EBITDA basis giving it a multiple of 7x (which is at discount to its peer like KEC International which trades at 8x). Two transmission annuity projects are valued based on DCF methods. For JMC we have taken Market cap of the company (as it is listed entity) and have assigned it a holding company discount of 25%. KPTL also has two reality development projects at Thane and Indore, which we have valued at book value. We’ve assigned 20x EV/EBITDA multiple to Shree Shubham Logistics, in line with its high growth, niche business model and peer company valuation (Snowman Logistics).
Based on SOTP Valuation we have arrived at a price target of Rs 332. Stock is currently trading at CMP of Rs 236, which gives the upside potential of ~40% from current levels. Seeing the potential upside we recommend BUY on the stock.”
So, there you have it. Daljeet has foreseen a 40% upside from the stock. Now, the decision is entirely yours about what you want to do with the information provided.
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