Buy Kalpataru Power, target Rs 670: Phillip Capital

Phillip Capital (India) has given a buy recommendation on Kalpataru Power Transmissions with a target price of Rs 670.

Shares of Kalpataru Power Transmissions traded at Rs 500 around 1:15 pm on 14 June, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.

"Kalpataru Power Transmission is a unique play on key infrastructure-sector segments, backed by a management that has consistently demonstrated its ability to incubate new businesses, expand margins, and manage working capital," said the brokerage.


A major drag on Kalpataru Power, so far, has been its capital deployment into asset-ownership and non-core diversification, which the brokerage believes should peak and reverse in FY21, leading to a substantial release of cash.

The brokerage estimates a healthy 19 per cent CAGR in FY19-22 earnings, while the stock trades at 12 times FY21 PE against its long-term average 16 times.

The stock currently trades at below average valuations. Release of equity through assets sales will be a key re-rating trigger, the brokerage added.

Among the key risks, a structural slowdown in domestic power T&D capex, resumption of equity infusion in non-strategic assets and higher loss funding in roads are important.