K.P. ENERGY

Riding demand for clean power

KP Energy is a leading energy company primarily engaged in wind farm development, development of wind power projects and allied services, along with generation of electricity through wind power, and operation and maintenance services of wind power projects primarily in India. The company operates through three segments: Infrastructure Development, Sale of Power, and Operation & Maintenance Services of wind power projects.

In addition to wind energy prowess, the company takes pride in owning and operating four wind energy turbines, boasting a capacity of 8.4 MW, and a recently executed solar power plant with a capacity of 10MWdc.

KP Energy has strategically diversified operations into three key verticals —EPCC, O&M, and IPP -- within the renewable energy sector. This approach enables it to navigate the vagaries of the industry and build resilience in its business model, while offering comprehensive solutions throughout the wind energy project lifecycle. Its EPCC vertical serves as a flagship division, showcasing its expertise in engineering, procurement, construction, and commissioning.

FINANCIAL LEAP

The company has made rapid strides on the financial front. During the last 12 years, its sales turnover has taken a high jump from Rs 3 crore in fiscal 2012 to Rs 434 crore in fiscal 2023, with operating profit skyrocketing from zero to Rs 70 crore and the profit at net level shooting up from zero to Rs 44 crore. What is more, prospects for the company going ahead are all the more promising. Consider:

• The company has cheered its investors with a memorable New Year gift in the form of a liberal bonus issue in the ratio of 2:1; i.e., two bonus shares for every share held by an investor.

• The new year (2024) has started on an auspicious note for KP Energy. The company has secured a huge order for a 86.1 MW wind-solar hybrid power project from ABREL EPC Ltd. – an Aditya Birla group company. For this ambitious windsolar hybrid power project (comprising 86 MW wind and 65 MW solar), KP Energy will be responsible for providing a range of services, including engineering, procurement and construction. The project is scheduled to be commissioned in the financial year 2024-25.

SOLID VERTICAL

By offering an extensive scope of services under the EPCC business vertical, KP Energy has established a strong foundation for success. Its commitment to providing end-to-end solutions, from site identification to commissioning, enables it to deliver exceptional value to clients. Building upon this solid framework, it has identified key strengths that have been instrumental in driving achievements. These strengths form the backbone of its business and serve as the pillars of its success.

• In the renewable energy landscape, India’s wind sector outlook is exceptionally favourable, presenting the company with a multitude of inquiries, client engagements, and robust business prospects.

POWER ROADMAP

• Looking ahead, its vision extends even further as it sets sights on installing 100 MW of its own power generating assets by calendar year 2025. Additionally, its O&M business is set to grow in tandem with its expanding EPCC operations. As it continues to scale up its EPCC projects and add new installations to its portfolio, the demand for efficient and reliable O&M services will naturally follow suit. It remains dedicated to delivering superior O&M support, ensuring the optimal performance and longevity of projects.

• The outlook for company’s future remains promising. With a robust business pipeline for wind standalone and wind-solar hybrid power projects, KPEL is poised for continuous growth in revenue from its EPC activities. Its discussions with renowned IPPs for largescale projects in Gujarat signify its commitment to expanding its footprint. It has a strong business pipeline of projects under CTU and STU.

PERFORMANCE INDICATORS (Rs. in crore)

VASCON ENGINEERS

Robust orders for EPC business

Pune-headquartered Vascon Engineers Ltd is a leading construction and engineering company with around 38 years of experience in conceiving, developing, constructing and managing varied projects. It is active in multiple sectors, including residential, industrial, IT parks, malls and multiplexes, hospitality and community welfare centres, and schools and hospitals. During the last 38 years, it has created a number of projects of eminence and splendour on a timely basis.

By now it has already completed over 200 projects with a construction area of over 50 million sq feet and is known for maintaining high-quality standards and timely execution of projects. It has a track record of successful and timely execution of landmark projects such as Ruby Mills (Mumbai), Suzlon One Earth (Pune), Symbiosis College (Pune), IGI airport, and multi-level car parking (New Delhi), and has also received its first redevelopment project in Mumbai.

The company has been making steady progress on the financial front. During the last 12 years, its sales turnover has expanded from Rs 712 crore in fiscal 2012 to Rs 1,019 crore in fiscal 2023, with operating profit trebling from Rs 38 crore to Rs 118 crore and the profit at net level shooting up over six times from Rs 15 crore to @ Rs 90 crore. Prospects for the company going ahead are all the more encouraging. Consider:

• During the first half of the current fiscal, the company saw a steady momentum for the overall business. During Q2 FY2024, it has won new orders amounting to Rs 1084 crore. This will push up the pace of business in the second half of the current fiscal.

ORDERS BOOM

• The company started the current year with an order book of Rs 2,172 crore, and executed orders worth Rs 302 crore in the first half (April to September 2023). During Q2, it received new orders of Rs 1,034 crore. Recent orders include a letter of acceptance of Rs 513 crore for construction of Lohia Medical College and Hospital at Supaul in Bihar. It also received an LoI for Rs 222 crore from Bridge and Roof Company, a government of India enterprise, for construction of a medical college at Kanker district of Chhattisgarh. It also received an LoI for Rs 299 crore from the Jharkhand State Building Construction Corporation for construction of the remaining work of the medical college and upgradation of the district hospital in Koderma.
• The company’s total order book as on September 30, 2023 stands at Rs 2,854 crore, which forms almost 4.3 times the FY23 revenues, providing strong visibility of EPC revenue growth for the next 3 years. Of the total orders, EPC orders are Rs 2,476 crore and Rs 378 crore from internal orders. Further, almost 87 per cent of the order book is towards government projects, which provides visibility of faster execution and uninterrupted cash flows.
• In the case of the real estate business, the nature of the book- keeping is such that there can be some time difference between booking of expenses and booking of revenues. In the case of Vascon, a large part of its real estate project portfolio is completed, and the company will start seeing a positive reflection in the results from its real estate business segment from next year onwards.
• The company’s financial position is steadily improving. As on March 31, 2023 its reserves stand at Rs 694 crore – over three times its equity capital of Rs 217 crore. The company has reduced its debt from Rs 360 crore in fiscal 2014 steadily to Rs 142 crore in fiscal 2023, bringing down in the process finance costs from Rs 44 crore in fiscal 2014 to Rs 13 crore in fiscal 2023. In FY 2024, we expect the company to register sales EPS of Rs 4.6 and EPS of Rs 6.4 for FY 2025. The scrip trades at Rs 73. P/E on FY 2025 EPS works out to 11.5.

PERFORMANCE INDICATORS (Rs. in crore)