K.P Energy Thesis
Industry Overview
The total installed power generation capacity is the sum of utility capacity, captive power capacity, and other non-utilities which is 482.232 GW.
India’s total installed renewable energy capacity is around 168.96 GW.
Renewable energy is 12% of total power generation.
Wind energy(42.8GW) accounts for 25% of total renewable energy.
Sale of Energy Segment
Through Analysis we get to know that there can be 3-5Cr investment needed to setup 1MW wind power plant and same as solar plant.
And company total plant and machinery in FY17 was 45 which was increased to 132 in FY22 has they had setup their own wind energy and solar energy asset to distribute the energy.
“KP Energy has its own wind energy assets of 8.4 MW (4*2.1 MW) capacity
The Company has recently commissioned a 10 MWdc solar power project”
Lets estimate the total cost for this capex would be near to 80-90 Cr and the revenue in FY23 is 10CR from only wind energy because solar commenced in last quarter of FY23.
" The company is planning to achieve installation of 100MW of own power generating assets under
IPP segment by calendar year 2025."
PBT Margin in Energy distribution can be near to 60%.
Revenue was 10Cr we assume it was fully utilise and the future projection is near to 100MW compare to todays 8.4
So when the capacity of 100mw will commence we can expect 120-150 Cr(At minimum Level) of Revenue from this with 60% of PBT.
O&M( Operation & Management)
As of date, KP Energy has over 530 MW under its O&M purview being the projects executed and being developed by KP Energy.
This Segment demand is fully depend on epcc business the growth in epcc will directly create more demand in O&M.
Current Revenue is around 4 Cr, so we can assume 75Lakh of revenue will generate from 100MW.
So 100 MW increase in O&M we can expect 75lakh to 1Cr increase in revenue with a PBT margins of 55-60%.
EPCC (Engineering, Procurement, Construction and Commissioning)
1,182.8 MW Business Pipeline of 830 MW and Projects Under Execution totaling 352.8 MW at various sites
Lets assume 352.8 MW is under execution and the company get around 424Cr of revenue for this 352.8MW of execution which is equal to 1.21Cr per MW.
and if we expect 830 Cr of pipeline excute in next two year it can generate 1000Cr of revenue from this pipeline which means 500 Cr each year.
Revenue in FY25
EPPC= 500-600 Cr
IPP =100-150Cr
O&M (If we see in FY22 this segment having 230 MW and in FY23 it is 530 jump of 300 MW which can be because of their project execution in Epcc, further we can expect additon of 600 to 700 MW in this segment)
12-15Cr.
Their are 3 main companies, Kp energy, KPI, energy and Kp buildcon.
Kp energy is in wind energy and also provide hybrid like wind + solar.
Kpi energy is mainly in solar energy where they provide services like IPP & EPC.
Kp Buildcon is in manufacturing of fabrication and Hot-Dip Galvanising of Transmission Line Structure, Substation & Switchyard Structures, and Windmill Structures. which are need to setup plants like in the sector of wind energy, solar energy, telecom sector, oil & gas, railways.
The Co. has incorporated a wholly-owned subsidiary - KP Energy OMS Limited, and executed a business transfer agreement with it, to facilitate the O&M via the subsidiary.
Now lets see how we can relate this business.
If we see from the perspective of Kp energy they first take the projects regarding wind or solar, and plans the execution of setup like construction of road, switch yard, Energy station, HV lines etc.
They do not manufacture the wind turbines or solar panel , the main product they buy from authorized supplier same with KPI energy, but rest of this like, electricals, switch yard, hv line, discounter, are done by the company.
So they may undertake the projects with partnership of some authorised supplier or wind mills manufacturer like Suzon
We can see that the company and the group of companies of KP following the asset light model because of that we can see the high ROCE compared to other wind energy players.
In their 3 business segment Epcc, Sale of Energy, O&M majorly they get revenue from Epcc in FY 23 it was 96% so we can see this segment has less margins compared to other but has highest turnover further the company is expected to increase their sale of energy reaching upto 100 MW compared to 18.4MW now this is the segment which will provide the high margins to the business as it have PBT margin of near to 60%.
In FY25 we can expect their Sale of energy segment will contribute around 20%.
If we see on their capital allocation or capital employed a major part of capital is used in execution of balance of plant, and very less capital is used in independent power producing it only occurs one time investments and maintenance.
Operation & Maintenance are get by the company when they completed the order through Epcc.
Over all the business is good but in FY25 their revenue from Epcc (High Roce business)will decrease and revenue from Sale of energy (low Roce business) will decrease. It can be biggest threat also, but if profitability will grow much faster than the decrease in Roce, then the business will not get that much affected.
Disclaimer : This is for Educational purpose only, it is not any kind of stock recommendation.
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