Kalpataru Projects International Limited (KPIL) has demonstrated a promising yet challenging Q2 FY25 performance, as outlined in Prabhudas Lilladher's latest research report. Despite slower collections and impact on specific business segments, KPIL’s strong order book and expanded margins signify a steady growth outlook, with the research firm recommending an ‘Accumulate’ rating. Prabhudas Lilladher projects a target price (TP) of Rs1,368, reflecting a cautiously optimistic stance toward KPIL’s future performance, particularly in Transmission & Distribution (T&D) and Oil & Gas (O&G) sectors. Below is a detailed breakdown of the firm’s latest insights.

Summary of Key Performance Metrics

Revenue and Margins: KPIL reported a standalone revenue increase of 7.6% YoY, reaching Rs41.4 billion, driven largely by robust gains in its O&G and Urban Infrastructure divisions. EBITDA margins improved by 39 basis points to 8.4%, largely due to a 92bps reduction in other expenses, although offset by increased personnel costs.

Net Working Capital (NWC): KPIL’s NWC days rose to 118 from 104 in Q2 FY24, impacted by delayed collections, particularly in the Water business. Management aims to reduce NWC days below 100 by focusing on easing collection cycles and operational efficiencies.

Order Book Analysis

KPIL has maintained a strong order book of Rs606.3 billion, representing 3.6x its TTM revenue. The mix is favorably distributed with 55% of orders domestic and 45% international, reflecting a diversified project pipeline.

Domestic T&D Opportunities: KPIL’s domestic T&D order book has been bolstered by macroeconomic tailwinds, with an anticipated annual opportunity worth Rs500-600 billion over the next three years.
International Market Position: The company continues to see traction across Nordic, Brazilian, European, and Middle Eastern markets, with subsidiary contributions from Linjemontage and Fasttel.

Business Segment Performance

Water Business: Despite a robust order book in the Water segment, delayed collections led to a 43.3% YoY revenue decline in Q2. However, management anticipates a rebound as collection cycles stabilize in the coming quarters.

Oil & Gas (O&G): Execution in the O&G sector surged by 170.8% YoY, with ongoing projects in Saudi Arabia expected to drive peak revenue in FY26-FY27. The strong momentum, with over 50% of project designs completed, positions KPIL well for long-term growth.

Buildings & Factories (B&F): With an order book of Rs131.6 billion, KPIL’s B&F segment experienced a 32.3% YoY revenue increase in Q2. Recent wins in luxury housing, airport infrastructure, and design-build projects further strengthen this division’s revenue outlook.

Railways: Due to intense market competition, KPIL has adopted a selective approach to railway projects. While this segment's contribution declined by 40.2% YoY, the company remains focused on capitalizing on existing orders while freeing up capital for strategic investments.

Financial Guidance and Strategic Focus

KPIL’s management projects a challenging path to achieving its FY25 revenue growth target of 20%, given ongoing issues in the Water segment. Nevertheless, management remains confident in delivering a PBT margin of 4-4.5%.

PBT Margin Guidance: On a standalone basis, KPIL anticipates margin improvement of 25-30bps, with double-digit PBT margins expected in the T&D business over the next few years.

Debt and Cash Flow Strategy: Net debt as of Q2 FY25 stands at Rs27.9 billion. In its bid to maintain financial flexibility, KPIL has strategically divested assets, such as the recent sale of its road BOOT assets, with the intent of further reducing interest expenses and supporting working capital.

Valuation and EPS Projections

Prabhudas Lilladher values KPIL’s core business at 18x PE on Sep-FY26 estimates. The stock currently trades at a P/E of 30.7x for FY25E and 19.8x for FY26E, reflecting KPIL’s growing valuation amid heightened operational performance.

EPS Projections: The firm anticipates an EPS of Rs62.7 for FY26, up 55.3% YoY, and Rs86.0 for FY27, up 37.1% YoY, indicating solid long-term earnings growth.

Investment Rationale and Target Price

Target Price Revision: The target price has been revised to Rs1,368 (down from Rs1,413), aligning with the broader market outlook and segment-wise performance. Despite challenges, KPIL’s diversified project portfolio and strategic focus on higher-margin segments reinforce Prabhudas Lilladher’s positive long-term view.

Long-Term Positives:

Strong demand in the T&D sector and selective growth in high-margin segments.
Geographic diversification provides a hedge against localized economic fluctuations.
Operational synergies from the JMC merger and potential margin expansion in T&D.
Investors are encouraged to accumulate KPIL stock at its current price of Rs1,242, with the expectation of gradual value realization as KPIL stabilizes collection cycles, bolsters its Water and Railways business, and capitalizes on international growth opportunities.

This structured approach offers a comprehensive assessment of KPIL’s near- and long-term outlook, making it a strategically sound investment for investors focused on infrastructure growth in emerging markets.