HSBC reiterates 'Overweight' rating on Kalpataru Power
HSBC reiterates 'Overweight' rating on Kalpataru Power with a target price of Rs. 360. Kalpataru Power, last month, announced orders of Rs 1,160 crore, including orders from Power Grid Corp.
RESEARCH: HSBC
RATING: OVERWEIGHT
CMP: RS 335
HSBC reiterates 'Overweight' rating on Kalpataru Power with a target price of Rs. 360. Kalpataru Power, last month, announced orders of Rs 1,160 crore, including orders from Power Grid Corp and a pipeline laying order from Hindusthan Mittal Energy.
Thus, its consolidated order book has increased to Rs 6800 crore, or 2x FY09E sales. Its stand-alone order book of Rs 5,100 crore, or 2.4x of FY09E stand-alone sales, is the strongest among the transmission tower companies like Jyoti Structures, at 1.9x of FY09E sales, and KEC International, at 1.5x. In a business that is working capital-intensive , Kalpataru Power has the least balance-sheet gearing, of FY10E net debt/equity of 0.4x, compared to peers such as Jyoti structures, at 0.6x, and KEC International, at 1x.
Based on FY10E price to book (PB) value, Kalpataru Power���s stock is trading at the cheapest multiple of 0.7x; among peers, Jyoti Structures is trading at 0.8x and KEC International at 0.9x. HSBC values Kalpataru using price to earnings (PE) and PB multiple-based methods. Based on a target PE of 5x and December 2009E EPS, fair value for the stock is Rs 340. HSBC���s target PB multiple is 1x, and based on December 2009 BVPS (book value per share), it arrives at a fair value of Rs 380. The target of Rs 360 is the midpoint of our PE and PB multiple-based valuations.
RATING: OVERWEIGHT
CMP: RS 335
HSBC reiterates 'Overweight' rating on Kalpataru Power with a target price of Rs. 360. Kalpataru Power, last month, announced orders of Rs 1,160 crore, including orders from Power Grid Corp and a pipeline laying order from Hindusthan Mittal Energy.
Thus, its consolidated order book has increased to Rs 6800 crore, or 2x FY09E sales. Its stand-alone order book of Rs 5,100 crore, or 2.4x of FY09E stand-alone sales, is the strongest among the transmission tower companies like Jyoti Structures, at 1.9x of FY09E sales, and KEC International, at 1.5x. In a business that is working capital-intensive , Kalpataru Power has the least balance-sheet gearing, of FY10E net debt/equity of 0.4x, compared to peers such as Jyoti structures, at 0.6x, and KEC International, at 1x.
Based on FY10E price to book (PB) value, Kalpataru Power���s stock is trading at the cheapest multiple of 0.7x; among peers, Jyoti Structures is trading at 0.8x and KEC International at 0.9x. HSBC values Kalpataru using price to earnings (PE) and PB multiple-based methods. Based on a target PE of 5x and December 2009E EPS, fair value for the stock is Rs 340. HSBC���s target PB multiple is 1x, and based on December 2009 BVPS (book value per share), it arrives at a fair value of Rs 380. The target of Rs 360 is the midpoint of our PE and PB multiple-based valuations.
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