Kalpataru Projects margin beat and debt reduction support order-led growth outlook

Investment View and Valuation

In its August 11, 2026 first-quarter FY27 result update, Motilal Oswal Financial Services retained its Buy rating on Kalpataru Projects International. The broker considers the quarterly result ahead of expectations because profitability exceeded estimates, supported by better margins and higher other income.

MOFSL expects execution momentum to improve in subsequent quarters, aided by a strong ordering pipeline across transmission and distribution, buildings and factories, and oil and gas. The investment view is also supported by the company having hived off most non-core assets, lower borrowings, strong margins and healthy leverage.

The unchanged Rs 1,600 target price values the core business at 18 times September 2028 estimated EPS.

First-Quarter FY27 Financial Performance

Kalpataru Projects International reported first-quarter FY27 revenue of Rs 54.8 billion, up 9 per cent year-on-year and broadly in line with MOFSL's estimate. Growth reflected strong execution in key segments, except water and railways.

Reported PAT growth was driven by better margins, higher other income and a lower tax rate. Net working-capital days improved to 94 from 106 a year earlier, while net debt more than halved to Rs 7.5 billion from Rs 19.4 billion.

Order Book and Segment Outlook

First-quarter FY27 order inflow was Rs 77 billion, lower year-on-year on a high base, taking the order book to Rs 666 billion, up 2 per cent year-on-year.

Transmission and Distribution

Like-for-like revenue, excluding Fasttel, increased 10 per cent year-on-year. The segment secured more than Rs 42 billion of orders year-to-date and held L1 positions above Rs 50 billion, with increasing exposure to HVDC and GIS projects.

Management sees a domestic transmission and distribution addressable market of Rs 1.0 trillion to Rs 1.25 trillion annually for at least five years, driven by transmission expansion and renewable-energy evacuation. Grid-capacity constraints in Europe, the Middle East and parts of South America are additional international opportunities. MOFSL forecasts a 12 per cent revenue CAGR and 15 per cent order-inflow CAGR for transmission and distribution over FY26-FY29.

Buildings and Factories

Buildings and factories revenue grew 15 per cent year-on-year to Rs 16.9 billion. Order inflows exceeded Rs 28 billion year-to-date, L1 positions were about Rs 22 billion and the order book exceeded Rs 196 billion. Demand spans residential, commercial offices, data centres, airports and industrial projects.

Oil and Gas

Oil and gas revenue increased 18 per cent year-on-year, with Saudi Arabia execution progressing well. Management identified the Middle East as the principal oil and gas opportunity over the next one to two years. Rupee-equivalent bids of USD 100 million to USD 500 million across Saudi Arabia, the UAE, Qatar and Kuwait are expected to be awarded over three to six months.

Water, Urban Infrastructure and Railways

Water revenue was Rs 6 billion, in line with planned execution. The Rs 3.4 billion Middle East water-treatment order marked entry into a new market, while collections reached about Rs 6.5 billion year-to-date, including July.

Urban infrastructure benefits from Metro Rail work, with all six tunnel-boring machines deployed and the first underground Kanpur project nearly complete. Railways execution remained weak, as Kalpataru Projects International focused on project closures and selective new bidding.

Management Guidance and Estimates

Management retained its FY27 guidance for order inflows of Rs 300 billion, revenue growth of at least 15 per cent and more than 75 basis points of year-on-year PBT-margin improvement.

MOFSL raised its FY27 and FY28 estimates by 6 per cent and 2 per cent respectively, reflecting better expected margins. It forecasts revenue, EBITDA and PAT CAGRs of 14 per cent, 14 per cent and 18 per cent respectively over FY26-FY29.

Key Risks

• Slower execution
• Weaker-than-expected order inflows
• A sharp increase in commodity prices
• Higher promoter pledges