Brokerage firm Emkay Global Financial Services has maintained a buy call on the stock of Kalpataru Power Transmission and increased the target price to ₹545 per share from ₹500 earlier, implying a 27% upside from the stock's closing of ₹429.75 on September 6 on BSE.
The brokerage firm believes that the improvement in orders, the merger process underway and the expectation of a lower promoter pledge are the key triggers expected to play out over the next one year.
As per the brokerage firm, the company's management expects 15% sales growth, EBITDAM of about 9%, and an order inflow of ₹21,000 crore during FY23 for the consolidated entity.
"Given the strong inflow in the first five months of the current fiscal, we raise our order inflow estimate by nearly 10% to ₹9,500 crore, which increases our earnings per share (EPS) for FY24 and FY25 by about 2.5% each," said the brokerage firm.
On the merger front, no objection has been received from either SEBI or the stock exchanges; a petition has been filed with the NCLT and the merger is expected by the end-FY23.
Emkay highlighted that JMC Projects continues to showcase a robust order book and will drive growth for the merged entity.
In the past few years, JMC’s order book has seen a multi-fold increase, owing to significant wins in the water business and an uptick in the building and factories segment. In 1QFY23, sales grew by 44% YoY, with EBITDAM of 8.4%. YTD inflows stood at about ₹3,700 crore. Order book stood at nearly ₹19,500 crore, with an additional L1 of ₹2800 crore, Emkay said.
Promoter pledging is maintained at nearly 50% of the promoter holding of 51.6%. Emkay said the management had earlier indicated that promoters intend to bring this down by September-October 2022. The brokerage firm believes that any significant improvement in sales on the real estate front can lead to lower pledging.
"We increase our SoTP-based Jun-2023 target price to ₹545 per share from ₹500 earlier due to roll over and increase in earnings for FY24/FY25. We maintain a buy. We believe improving inflow and lower raw-material costs imply better earnings for Kalpataru Power in the coming times. Risks include any slowdown in ordering or increase in promoter pledge," said Emkay.
According to a MintGenie poll, an average of 14 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firm. These do not represent the views of MintGenie.
