Kalpataru Projects rises for third day; up over 134% in last one year

Kalpataru Projects International jumped 5.34% to Rs 1245.65, extending gains for third day in a row.

The stock has added 17.15% in three sessions, from its recent closing low of Rs 1,063.30 recorded on 04 June 2024. The benchmark S&P BSE Sensex has added 5.95% during the same period.

The scrip is currently trading above its 50-day, 100-day and 200-day simple moving averages (SMAs) placed at 1170.15, 1198.63 and 1200.43, respectively.

The scrip has managed to outperform the market in past one year, up 134.57% as against Sensex's 20.81% rise.

In an exchange filing made post market hours yesterday, Kalpataru Projects International informed that India Ratings & Research has affirmed the companys long-term rating at IND AA with stable outlook. The agency has also affirmed the companys short-term rating at IND A1+.

Offering the rating rationale, India Ratings stated that the ratings reflect the strength in KPILs business and credit profile, supported by an improvement in the scale of execution, its operating revenue, and EBITDA margins profile over FY23-FY24.

India Ratings believes given that the companys order inflows over FY22-FY24 are likely to be aligned to prevalent commodity prices, their contribution to work execution would support its margin recovery over the medium term.

Furthermore, the companys strong order booking over FY23 FY24 with a closing standalone order book of INR 548 billion (3.3x FY24 operating revenues) provides strong revenue visibility over the medium term.

However, the companys working capital cycle remained higher over FY23 and FY24, compared to its historical levels, mainly due to building up of contract assets on account of mobilisation/preliminary works in its newly started projects, elongated payment milestones in railways and a slowdown in execution in certain projects.

As its newly started projects pick up pace, India Ratings expects the billing to start gradually against the mobilisation/preliminary contract assets.

With a sustained reduction in the railways sector order book (as a percentage of the total order book) in the past few years and a likely movement/closure of some of these railways and water supply orders in FY25, the gross working capital cycle is expected to improve in the medium term, which shall be a key monitorable.

The agency has further said that a steady increase in the profitability while maintaining segmental, geographic and project-wise diversification with the net leverage (including acceptances) remaining below 1.5x, on a sustained basis, could lead to a positive rating action.

However, a deterioration in the profitability, an increase in the working capital lock-up, leading to a rise in the debt, and/or higher-than-expected cash outflows to its SPVs resulting in the net leverage (including acceptances) remaining above 2.0x, on a sustained basis, could lead to a negative rating action.

Kalpataru Projects International (KPIL) is part of the Kalpataru Group, a diversified conglomerate with interests in EPC and real estate. KPIL is involved in EPC segment mainly in power T&D segment, railway infrastructure and oil & gas infrastructure and has presence in 70 countries. KPIL has extended its reach in the European market through its subsidiary Linjemontagei Grastorp AB in Sweden and Latin America through its subsidiary Fasttel Engenharia Ltda in Brazil.

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