Fundamental Analysis of KP Energy: To keep the nation progressive, the Central government of India takes the country towards creating a renewable revolution to have a sustainable Future. One such company that will be in focus is KP Energy. KP Energy is a leading provider of Balance of plant (BOP) solutions which is highly required for the wind energy industry.

In this article, we will conduct a fundamental analysis of KP Energy, aiming to comprehend its operations, financials, and future potential.

Fundamental Analysis of KP Energy – Company Overview

KP Energy takes care of the entire wind farm development value chain process, starting from conceptualization to the commissioning of projects along with its maintenance. The major services of KP Energy include site identification, preparation, and construction along with power evacuation and its maintenance.

KP Energy plays a major role in coordinating the different range of activities that are related to the utility-scale wind farm and its development. KP Energy is a company that is well recognized and considered as the number one Balance of Plant (BOP) solution provider in the state of Gujarat.

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The company has a rich history of completing a 735.1 MW business pipeline, with an 18.4 MW Independent power producer (IPP). KP Energy also has 4 operational wind energy, each of which has a capacity of 2.1 MW and a 10 MW solar power project. KP Energy was awarded by NPTC for achieving a massive order of 464.10 MW from a single customer.

KP Energy got an order of 23.1 MW from Aditya Birla Renewable Energy Ltd, one of its existing customers. To highlight their excellent performance executed by the company includes the completion of a 300 MW wind farm pooling substation. Secondly, completion of civil road work and mechanical roads related to the 252MW Siddhpur project.

In this Fundamental Analysis of KP Energy, we have understood the basics of the company which can help in the further analysis of KP Energy.

Segment Analysis

The next part of Fundamental Analysis of KP Energy is segment analysis. KP Energy has mainly three important business segments from which it generates its revenue, namely,

Project-Based Revenue Engineering, Procurement, Construction, and Commissioning (EPCC): This is a major segment that contributes most of the revenue for the business. The activities under this segment include site identification of windy sites and acquisition, preparation of the site by constructing access roads, logistics, and installation of wind farms.

Annuity Base Revenue – Operations and Maintenance (O&M): The segment under this works in providing the proper operations and maintenance services for all the Balance of plant (BOP) wind farms. 

Independent Power Producers (IPP): As the name suggests, KP Energy works for its independent power, as a part of this process they have their renewable energy generation with a capacity of 18.4 MW. Hence, each of these segments has a key role in establishing the company as a significant player in the wind energy market.

The table below depicts the revenue contribution of each segment:

Particulars Contributions In FY2023
EPCC91.74%
IPP6.84%
O&M1.42%

Industry Overview

KP Energy takes care of the entire wind farm development value chain process starting from conceptualization to the commissioning of projects along with its maintenance. The major services include site identification, preparation and construction along with power evacuation and its maintenance.

KP Energy plays a major role in coordinating the different range of activities that are related to the utility-scale wind farm and its development. KP Energy is a company that is well recognized and considered as the number one Balance of Plant (BOP) solution provider in the state of Gujarat.

The company has a rich history of completing a 735.1 MW business pipeline, with an 18.4 MW Independent power producer (IPP), and has 4 operational wind energy, each of which has a capacity of 2.1 MW and 10 MW solar power project. KP Energy was awarded by NPTC for achieving a massive order of 464.10 MW from a single customer.

KP Energy due to its strong management and quality is getting orders repeatedly of 23.1 MW from most of its existing customers, one of which is an order from Aditya Birla Renewables Energy Limited a notable company.

To highlight their excellent performance executed by the company includes the completion of a 300 MW wind farm pooling substation and the completion of civil road work and mechanical roads related to the 252MW Siddhpur project.

Fundamental Analysis of KP Energy – Financials

Revenue & Net profit

The Income statement of the company shows that the revenue of the company has seen a huge increase of 74.86% that is from 250.38 Crores in FY 2022 to 437.82 Crores in FY 2023. It had also seen an increase of 249.04% in FY 2022 compared to its previous year. The revenue growth on a 5-year basis has a CAGR of 144.51%.

Net profits of the company saw an increase of 140.36% from 18.27 crores in FY 2022 to 43.91 crores in FY 2023. The 5-year CAGR stands at 186.19% indicating a strong growth potential.

Fiscal year Revenue from Operations (In Crores)Net Profit (In Crores)
2023437.8243.91
2022250.3818.27
202171.746.06
202074.991.1
2019158.4119.44
5 Year CAGR 144.51%186.19%

Profit Margins

KP Energy reported an increase in both the operating profit margin as well as the net profit margin of 17.08% (OPM) and 9.93% (NPM) respectively from FY 2022 to FY 2023. The revenue growth is also getting reflected in the margins. The major key reasons for the increase are the efficient cost structure followed by the management along with a strong order book and projects.

The significant improvements in the profit margins are because of the increase in the incremental profit that the company received, other factors such as an increase in the revenue and companies measure on controlling the costs associated with its operations have contributed to the increase in the margins.

Fiscal year Operating Profit MarginNet Profit Margin
202317.08%9.93%
202214.74%7.20%
202126.37%8.28%
202015.05%1.46%
201921.01%12.23%
5 Year Average 18.85%7.82%

Return Ratios

The Return on capital employed (ROCE) saw an increase from 18.06% in FY 2022 to 37.88% in FY 2023, with a 3-year average of 21.57%. The improvements in return on capital employed (ROCE) are due to the good performance of the company that resulted in higher Earnings before interest and taxes (EBIT) and less cash outflow for the interest payments.

Return on Equity (ROE) has been increased by 16.8 % from 23.90% in FY 2022 to 40.70% in FY 2023. The average ROE considering the past 3 years is at 24.76%. The average Return on equity is higher by 3.19% compared to the Return on Capital employed indicating more returns for its equity holders. 

The improvement in the Return on equity (ROE) is a result of the increased revenue, particularly in the EPC segment of the company, other factors such as increased profits and repayments of term loans made by the company have made the return ratios improve.

Fiscal year ROCEROE
202337.88%40.70%
202218.06%23.90%
20218.76%9.68%
20206.00%1.84%
201932.97%41.12%
5- Year Average 20.73%23.45%

Leverage Ratios

The Debt to Equity of KP Energy in the FY 2023 is low at 0.32. The ratio is seen reducing since 2019 which was at 0.8 back then showing a significant reduction in the debt portion. Therefore, indicates the repayments made by the company.

The interest coverage ratio stood at 11.66 times in FY 2023. indicating the strength of the company to meet its interest payment obligations. Due to low debt, the Interest coverage ratio on an average of 3 years is at 7.12 times. In the Fundamental Analysis of KP Energy, the financials will give the audience a great outlook on their work in the finance sector.

Fiscal year Debt/Equity (Times)Interest Coverage ratio (Times)
20230.3211.66
20220.46.86
20210.512.83
20200.561.6
20190.86.21
5 Year Average 0.525.832

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Fundamental Analysis of KP Energy – Key Metrics

Particulars Amount Particulars Amount
CMP₹333Market Cap (Crores)₹2220
EPS 7.23 P/E Ratio (TTM)48.8
ROE40.70ROCE37.88
Promoters Holding 44.80%FII Holding 0.26%
Debt to Equity (TTM)0.32P/B15.2
Operating Profit Margin17.08%Net profit margin9.93%

Fundamental Analysis of KP Energy – Future Plans

Several plans for the company fall under the Fundamental Analysis of KP Energy. These plans are listed below.

  • At present KP Energy has 352.8 MW of capacity and is planning to add 830 MW shortly.
  • The company is actively engaged in an advanced discussion with the renowned Independent Power Producer (IPP) for the large-scale CTU development in Gujarat.
  • KP Energy has plans to install 100MW of its power-generating assets by the end of 2025 which results in sustainable growth.
  • The company upon the Government’s call to make the Net – Zero Emissions by 2070 is working hard towards it and also KP Energy has a major role to play in achieving the target.

Conclusion

We conclude the article on the Fundamental analysis of KP energy after going through the detailed information of the company’s overview, industry overview, financials of the company, and future outlook. The company sounds interesting and also has lots of growth opportunities due to the push and support given by the government.

Fundamental analysis of the KP energy is necessary to understand the risk and return involved in the company. Do drop your thoughts in the comment section below.

Written by Nishanth P

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