Rajesh Gupta | Rajesh.Gupta@sbicapsec.

com
 Long Term Investment Idea (12-18 Months)
KPI Green Energy Ltd. Initiating Coverage | Sector: Power
Rising Star | Sector: Power 17th November 2023

Retail Research I BUY KPI Green Energy Ltd.

Energizing the clean energy aspiration

KPI Green Energy Ltd is a leading player in green energy (solar power) with a
strong presence in the state of Gujarat. The company has nearly 3 decades of
Current Price* Rs. 1,168.0 experience in the industry. The company develops, builds, owns, manages, and
Target Price Rs. 1,419.0 maintains solar power facilities as an Independent Power Producer (IPP) and as a
Upside 21% service provider to Captive Power Producers (CPPs). We like the company due to
*CMP is based on live price as of 17th Nov 2023 a) Strong order book providing healthy revenue visibility, b) Sustainable business
STOCK DATA
given the enormous opportunity, c) Assured revenue due to long term PPAs
(Power Purchase Agreements) under IPP and low TAT (Turnaround time) in case
Industry Segment Power of CPP vertical, d) Aggressive growth targets ~1000 MW by 2025, e) Supportive
BSE Code 542323 government policy a win-win for all, f) Scalable growth backed by robust land
NSE Code KPIGREEN bank and g) Attractive valuation.
Bloomberg Code KPIG IN At the current price, KPI Green Energy is trading at PE multiple of
52 Week High / Low (Rs.) 960/345 24.1x/15.8x/11.2x of its FY24E/FY25E/FY26E earnings respectively. We initiate
Face Value (Rs.) 10.0 coverage on the company with BUY rating on the stock with target price of Rs
Diluted Number of Shares (Crore.) 3.6 1,419.0 valuing at 22.0x of its one year forward earnings thus providing an
Market Cap. (Rs Crore.) 4,209 upside potential of 21%.
Avg. Yearly Deliverable NSE Volume 93,043
Investment Rationale
SHAREHOLDING PATTERN (%) Strong order book providing healthy revenue visibility: The businesses of the
company are divided into two categories viz (1) IPP (Independent Power
Particulars Dec-22 Mar-23 Jun-23 Sep-23
Producer) and (2) CPP (Captive Power Producer). Under IPP, KPI builds, operates
and sells generated power to various OEMs under open access while under CPP,
Promoters 54.8 54.8 54.8 54.8
it designs, built, execute and maintains solar power plants for various clients
FII 0.1 0.2 1.1 1.9 willing to use power for captive use. Presently, the Company has 541 MW of
orders in pipeline. These orders comprise of 262 MW under CPP and rests 279
Other Institution 2.4 2.4 2.4 2.4
MW under IPP. The IPP orders also includes 240 MW of order from GUVNL
Public & Others 42.7 42.6 41.7 40.9 (Gujarat Urja Vikas Nigam Ltd) to be executed over the next 12 months and while
Total 100.0 100.0 100.0 100.0
rest 39 MW are other IPP orders.
Sustainable business given the enormous opportunity: We believe that green
RETURN STATISTIC (%) energy saga is yet to unfold. India is committed achieve net zero emissions by
2070 and hence strong emphasis is being given on green energy. India's success
Particulars 1M 3M 6M 12M
in solar energy is attributable to a combination of favourable market conditions,
KPI Green Energy Ltd 32.0 31.6 116.0 175.6 legislative advancements and the country's optimal climate, characterised by
BSE Small Cap 1.7 10.0 31.1 33.9
average 300 sunny days annually, which is ideal for solar power generation.
According to IEA, CEA and CRISIL, India is expected to add 10,000-11,000 MW of
Stock Performance (1-year) solar power capacity every year from its current pan India capacity of ~70,000
MW. Additionally, low cost per MW versus thermal is driving the investment
KPI Green Energy Ltd BSE Small-Cap towards solar power. According to Ministry of Power, Solar power capacity is
projected to reach 280 GW by 2030 thus growing at a CAGR of 21.5% between
290.0
2023 and 2030. The share of solar power in India’s total power capacity is
240.0 expected to touch 34.3% by 2030 from current 16.9%.
Financial Summary (Consolidated)
190.0
Particulars 2022A 2023A 2024E 2025E 2026E
140.0
Net Sales (Rs Cr) 229.8 643.8 919.7 1,382.3 1,948.9
90.0 Growth (%) 122.0 180.2 42.9 50.3 41.0
40.0 EBITDA (Rs Cr) 108.7 208.5 317.8 503.8 719.3
Nov-22

Nov-23
Feb-23

May-23

Aug-23

Growth (%) 70.7 91.7 52.4 58.5 42.8

Net Profit (Rs Cr) 43.1 109.6 175.1 267.1 378.5

Source: NSE Growth (%) 200.3 154.4 59.7 52.5 41.7

EPS (Rs) 23.9 30.3 48.5 73.9 104.7
Growth (%) 200.3 27.2 59.7 52.5 41.7
PE (x) 49.1 38.6 24.1 15.8 11.2
P/BV (x) 13.7 16.4 9.8 6.0 3.9
ROE (%) 32.4 53.3 50.7 47.1 42.6
ROCE (%) 22.9 29.7 29.5 27.6 26.4

SBICAP Securities Limited | 2

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Assured revenue due to long term PPAs under IPP and low TAT in case of CPP
vertical: KPI Green under IPP, given its long term PPAs under open access with
buyers, is assured of steady revenue flow. The company while signing PPAs
receives the guarantee to offtake 95% of power generated. Any shortfall in the
power offtake is simultaneously indemnified by the customers. The balance
unsold power is supplied to Discoms at Rs 3.3 per unit. These PPAs are signed for
15-20 years and thus ensure sustainable revenue inflow for KPI in the long term.

Under CPP, the company designs, executes and maintains solar power plants for
clients for their captive use. The company has deep industry experience backed
by robust infrastructure which helps it to reduce the overall turnaround time
(TAT). The average duration required to build power plant under CPP is 3-6
months for KPI vis-à-vis other players who might take 12-15 months.

Aggressive growth targets (~1000 MW by 2025): The company has set an

ambitious target to achieve 1,000 MW by 2025. KPI Green has already energized
346 MW so far while 541 MW of business is under pipeline. We believe, the
management will be able to achieve its target much before the timeline set by the
company. KPI Green is riding on an enormous opportunity under green energy
considering the cumulative evacuation capacities of 850+ MW and a large land
bank of 2,000 acres plus on group level.

Supportive government policy a win-win for all: The government, in an attempt

to promote indigenous production, has imposed a high import duty on solar PVs.
The Production Linked Incentive Scheme (Tranche II) under the ‘National
Programme on High Efficiency Solar PV Modules’ has been approved and
launched in Sep’22, with a budget allocation of Rs 19,500 cr. In addition to above,
the government has taken several other measures like PM-KUSUM, development
of Solar Parks and Ultra Mega Solar Power Projects etc. These initiatives by
government indicates the commitment towards promotion of green energy in the
long term which will create opportunities for all players irrespective of their size
of operations.

Other key measures

• In order to promote large-scale grid-connected solar power projects, a

scheme titled "Development of Solar Parks and Ultra Mega Solar Power
Projects" is being implemented with an objective to achieve a capacity
of 40 GW by March 2024.
• The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahaabhiyan
(PM-KUSUM) was implemented by the Government to enhance energy
and water security.
• Under climate change measure, the Government aims to meet 50% of its
energy needs from renewable resources by 2030

Setting up a solar power is win-win for both KPI Green and end user. The initial
cost of setting up a solar power plant is Rs 4-4.5 cr per MW which has potential
to generate ~16 lakh units of power every year assuming 18% PLF (Plant Load
Factor). The PLF can be higher up to 26% with usage of tracker and bifacial panel
technology. Assuming Rs 8 per unit as industrial cost of power, the net saving
every year is Rs 1.2 cr which effectively means the payback period is upto 4 years.
Additionally, accelerated depreciation further helps to lower the effective cost of
initial investment per MW.

SBICAP Securities Limited | 3

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Recently Gujarat government rolled out the renewable energy policy with an
aim to generate 50% of power through renewable energy sources by 2030. The
government expect to attract Rs 5 lakh cr investment in renewable energy to add
36 GW of solar and 143 GW of wind energy capacity going ahead.

The Gujarat Energy Development Agency (GEDA) will act as nodal agency for
project registration, validation, commissioning certificate and monthly progress
report. There will be no restrictions on the capacity to set up under renewable
energy projects with respect to the consumer's contracted demand.

High anticipated growth backed by robust land bank: The company between
FY19-FY23 has reported CAGR growth of 79.5% and 86.1% in net sales and profit
to Rs 643.8 cr and Rs 109.6 cr respectively. The EBITDA margin remained healthy
at 30% plus. The RoE now stands at >50% versus single digit during FY19 and FY20.

We expect a CAGR growth of 44.7% and 51.1% net sales and profit between FY23-
FY26E to Rs 1,948.9 and Rs 378.5 cr respectively. The EBITDA margin will remain
~36-37% with healthy RoE and RoCE of 50% and 28% respectively.

In solar power, availability of land bank is crucial for future capacity expansion.
The company presently has >2,000 acres of land bank at the group level and is
further looking to double the size of land bank in the near term.

Attractive valuation: We believe the earning outlook is well supported by the

order inflows. At the current price, KPI Green Energy is trading at PE multiple of
24.1x/15.8x/11.2x of its FY24E/FY25E/FY26E earnings respectively. We initiate
coverage on the company with BUY rating on the stock with target price of Rs
1,419.0 valuing at 22.0x of its one year forward earnings thus providing an upside
potential of 21%.

SBICAP Securities Limited | 4

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Strong order book providing healthy revenue visibility

New order inflows in CPP segment over next 3 years (Rs cr) CPP revenue to grow at a CAGR of 43% over next 3 years (Rs cr)
2,000.0 1,800.0 1,800.0 1,604.0
1,600.0
1,500.0 1,400.0
1,300.0 1,146.7
1,200.0
900.0 1,000.0 788.9
1,000.0
800.0
548.0
484.9 600.0
500.0 379.0
400.0
167.9
35.9 98.9 200.0 26.0 49.8
- -
FY20A FY21A FY22A FY23A FY24E FY25E FY26E FY20A FY21A FY22A FY23A FY24E FY25E FY26E

Source: Company, SSL Research Source: Company, SSL Research

IPP capacity to grow by 3.8x in the next 3 years (MW) IPP revenue to grow by 3.6x in the next 3 years
600.0 Sale of Power (Rs Cr)- LHS Growth %- (RHS)
527.0
500.0 400.0 344.9 150.0
427.0 350.0
400.0 300.0 110.0
235.7
250.0
300.0 130.8
200.0 70.0
200.0 162.0 150.0
137.0 57.6 94.7
100.0 100.0 30.0
100.0 48.9 48.2
40.8 50.0 27.9

- - (10.0)
FY20A FY21A FY22A FY23A FY24E FY25E FY26E FY20A FY21A FY22A FY23A FY24E FY25E FY26E

Source: Company, SSL Research Source: Company, SSL Research

IPP power rate per unit (Rs per unit) KPI Green to spent over Rs 2,000 cr in the next 3 years

Capex (Rs cr)- LHS Capex per MW ( Rs Cr)- RHS

7.0 6.4 6.4 1,325.0

6.0 6.1 1,400.0 18.0
6.0 5.5 16.0
5.0 5.0 1,200.0
5.0 14.0
1,000.0
12.0
4.0 800.0 10.0
3.0 550.0
600.0 190.6 8.0
2.0 310.6 6.0
400.0
118.7 139.0 162.5 4.0
1.0 200.0 2.0
- - -
FY20A FY21A FY22A FY23A FY24E FY25E FY26E FY20A FY21A FY22A FY23A FY24E FY25E FY26E

Source: Company, SSL Research Source: Company, SSL Research

SBICAP Securities Limited | 5

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Sustainable business given the enormous opportunity

Huge benefits of clean energy % Share of renewables in total global power generation
100%
Annual $4.2 Tn potential saving 86%

80%
30 million jobs can be created by 2030 60%
60%
Access to clean air as 90% of total population currently
breathing polluted air. 40%
29%
85% decrease in cost of electricity due to solar power from 2010 20%
to 2020. 20%

~90% share of world electricity can come from renewable by 2050. 0%

2010 2020 2035E 2050E

Source: IEA/IRENA Source: McKinsey Global Energy Perspective 2022

Global Renewable Market Size (USD Bn) Global Solar Power Market Size (USD Bn)
2,500 490.0
2,026
1,890 420.0
2,000 369
1,753 344
1,617 350.0 321
1,482 299
1,500 1,349 279
1,219 280.0 260
243
1,093 211 226
856
972
210.0 184 197
1,000
140.0
500
70.0

- -
2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
2021

2022

2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
2020

2021

2022

https://www.statista.com/ Source: https://www.precedenceresearch.com

Globally, % share of solar power in overall power set to intensify India’s base power demand (Billion Units)

1,700.0 1,600.0

25 22
20 1,400.0
20 18 1,276.0
17
15
15 13
11 1,100.0
9
10 8
7
6
4 5
5 2 3 800.0
1 1 2
0
500.0
2026E
2018

2023E
2024E
2025E

2027E
2010
2011
2012
2013
2014
2015
2016
2017

2019
2020
2021
2022

2021 2022E 2023E 2024E 2025E 2026E

Source: IEA Source: CRISIL/CEA

SBICAP Securities Limited | 6

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Power capacities across different categories The Govt.’s COP26 objectives (26th UN Climate Change Conference)

2023A 2030E
To reach 500 GW Non-fossil energy capacity by 2030
Capacity Installed CAGR %
Fuel-Type % Mix % Mix
(GW) (GW) (GW)
Solar 16.9 71.6 34.3 280.1 21.5 India will meet 50% of its energy requirements from renewable
Coal 50.0 212.8 32.7 266.9 3.3 by 2030.
Gas 5.9 25.0 3.1 25.1 0.0
Nuclear 1.8 7.5 2.3 19.0 14.2 India will reduce the total projected carbon emissions by 1
billion tonnes from now to 2030
Small Hydro 1.2 5.0 0.6 5.0 0.1
Wind 10.4 44.1 17.1 140.0 17.9
By 2030, India will reduce the carbon intensity of its economy
Biomass 2.6 10.8 1.2 10.0 (1.1) by less than 45%, over 2005 levels
Large Hydro 11.0 46.9 7.5 61.0 3.8
Others 0.2 0.6 1.3 10.2 50.3 By the year 2070, India will achieve the target of net zero carbon
Total 100.0 424.3 100.0 817.3 9.8 emission

Source: Ministry of Power, CEA Source: PIB

\\\\\\ \\\\

Sticky revenue due to long term PPAs under IPP and low TAT in case of CPP vertical
Turnaround time is lower in Captive Power Plants Units of power generated over the years under IPP (Mn. Units)

Industry experience of >2 decades

900 831
800 673
Solid land bank ~2,000 acres at the group level 700
600
500
Strong track record- served > 150 customers 400
216 255
300
158
200 64 77
Robust track record to regulatory compliances 100 8 15 24
0
FY17A

FY18A

FY19A

FY20A

FY21A

FY22A

FY23A

FY24E

FY25E

FY26E
Ventured into hybrid segment

Sources: Company, SSL Research Sources: Company, SSL Research

Aggressive growth targets ~1000 MW by 2025

IPP Capacity in MW Confident to achieve 1000 MW before FY25

600.0 527.0
500.0 427.0 Capacity
400.0 Energized 541+ MW
of capacity
300.0 346+ MW in pipeline
162.0 by 2QFY24
200.0 137.0
100.0
100.0 40.8 48.9
887+ MW capacity
- secured out of
FY20A FY21A FY22A FY23A FY24E FY25E FY26E
ambitious target of
1,000 MW
Cumulative Capacity (MW)

Sources: Company, SSL Research Sources: Company, SSL Research

SBICAP Securities Limited | 7

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Supportive government policy a win-win for all

Green Energy Corridor Wind Solar Hybrid Policy

Phase-I (Started in 2015-16)

Green Energy Corridor

1. Covered 8 States
2. Working on Grid Integration and Power Evacuation of
Wind Solar Hybrid
~24 GW
Policy

Phase-II (Started in Jan'22)

1. Covered 7 States Part of contribution to Set up 175 GW of RE
Started in 2018 capacity by 2022
2. Working on Grid Integration and Power Evacuation of Paris agreement
including Solar 100 GW
~20 GW and Wind 75 GW
3. Budget Rs 12,031 cr
4. Aim to achieve 450 GW installed Capacity of RE by 2030
5. To evacuate 20,000 MW of RE

Sources: PIB Sources: Company, SSL Research

Solar Park and Ultra Mega Solar Park Grid connected rooftop/PM KUSUM
Solar Park and Ultra Mega Solar

1. Launched in 2014 Government support

2. CFA (Central Financial Assistance) of 30% of
Projects

project cost or Rs 20 Lakh whichever is less

3. The government has sanctioned 50 Solar Parks for
39,000 MW Plus for 12 states Available to Individual
CFA of 30% of project PM KUSUM is available to and group of farmers,
4. Development of Solar Parks and Ultra Mega Solar cost farmers to install Solar Panchayat, Co-
Park Projects’ till FY26 irrigation pump (60% Operative, Water
5. 10,300 plus MW of project installed so far subsidy) and 30% loan User Association

Sources: PIB
Sources: PIB

High anticipated growth backed by robust

land bank:
Consolidated revenue to grow at 45% CAGR over next 3 years Robust EBITDA margin- 51% CAGR in EBITDA over next 3 years
Net Sales (Rs Cr)- LHS Net Sales YoY Growth (%)- RHS EBITDA (Rs Cr)- LHS EBITDA Margin (%)- RHS

2,100.0 1,948.9 225.0 1,000.0 61.6 70.0

1,750.0 60.0
180.0 45.6 47.3 36.9
1,382.3 750.0 50.0
1,400.0 36.4
135.0 32.4 34.6 40.0
1,050.0 919.7 500.0
643.8 90.0 30.0
700.0 20.0
250.0
350.0 229.8 45.0
59.3 103.5 10.0
- - - -
FY20A FY21A FY22A FY23A FY24E FY25E FY26E FY20A FY21A FY22A FY23A FY24E FY25E FY26E

Sources: Company, SSL Research Sources: Company, SSL Research

SBICAP Securities Limited | 8

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Net profit to grow at 51% CAGR over next 3 years Healthy return ratios
Net Profit (Rs Cr)- LHS Net Profit Margin (%)- RHS ROE (%) ROCE (%)

400.0 378.5 24.0

51 % CAGR 60 53.3
50.7
47.1
300.0 42.6
267.1 45
16.0
32.4
29.7 29.5 27.6
200.0 175.1 30 26.4
22.9
109.6 8.0 16.7
13.6
100.0 15 11.2
43.1 6.5
6.4 14.3
- 0.0 0
FY20A FY21A FY22A FY23A FY24E FY25E FY26E FY20A FY21A FY22A FY23A FY24E FY25E FY26E

Sources: Company, SSL Research Sources: Company, SSL Research

Attractive valuation
Sterling & Wilson Gensol Engineering
Company KPI Green Energy Ltd Waaree Renewables Tech. Ltd
Renewable Energy Ltd Ltd
Net Sales 766.0 414.4 1,769.9 558.8
EBITDA 253.8 102.2 (451.7) 130.4
PAT 134.3 66.8 (668.4) 27.7
EBITDA Margin (%) 33.1 24.7 - 23.3
Net Margin (%) 17.5 16.1 - 5.0
RoE (%) 53.3 96.1 - 19.4
RoCE (%) 24.6 83.8 - 9.7
CMP (Rs) 1,168.0 1,419.0 306.0 800.0
M.Cap (Rs Cr) 3,763.0 3,019.0 5,625.0 2,950.0
P/E (x) 31.3 44.2 - 109.3
P/BV (x) 13.0 26.2 - 10.5
EV/Sales (x) 5.7 7.3 4.3 5.7
Valuation is based on TTM Financial Data; Source: SSL Research, Capitaline

SBICAP Securities Limited | 9

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Sensitivity Analysis of QIP

The Company is planning to raise equity capital to fund the capex requirements. It has already raised Rs 126.0 cr through the
preferential issue to the promoter at Rs 830 per share (15.18 lakh shares). The Company is further looking to raise Rs 300-350 cr
through QIP in the near term to fund the recently won project from GUVNL for 240 MW. We have done a sensitivity analysis of
QIP (Rs 350 cr) at different prices and the resultant impact of valuation ratios, return ratios, and the leverage position of the
company.

Post- QIP @ Rs 950 per share FY23A FY24E FY25E FY26E

Pre-QIP situation FY23A FY24E FY25E FY26E No. of Share Issued (QIB) 3.6 0.6 - -
No. of Shares (Cr) 3.6 3.6 3.6 3.6 Price per shares (Rs) - 950.0 - -
Net Worth (Rs Cr) 257.9 433.0 700.1 1,078.6 Total Amount Raised (Rs Cr) - 526.6 - -
Debt (Rs Cr) 521.2 753.1 1,389.6 1,699.2 No. of Shares (Cr) 3.6 4.2 4.2 4.2
D/E (x) 2.0 1.7 2.0 1.6 Net Worth (Rs Cr) 257.9 959.6 1,205.0 1,557.5
EPS (Rs) 30.3 48.5 73.9 104.7 Debt (Rs Cr) 521.2 603.1 1,181.3 1,699.2
BVPS (Rs) 71.4 119.8 193.8 298.5 D/E (x) 2.0 0.6 1.0 1.1
RoE (%) 53.3 50.7 47.1 42.6 EPS (Rs) 30.3 41.8 63.8 90.4
RoCE (%) 29.7 29.5 27.6 26.4 BVPS (Rs) 71.4 229.2 287.8 372.0
P/E (x) 38.6 24.1 15.8 11.2 RoE (%) 53.3 28.8 24.7 27.4
P/BV (x) 16.4 9.8 6.0 3.9 RoCE (%) 29.7 24.7 22.9 22.8
P/E (x) 34.3 24.9 16.3 11.5
Post- QIP @ Rs 830 per share FY23A FY24E FY25E FY26E P/BV (x) 14.6 4.5 3.6 2.8

No. of Share Issued (QIB) - 0.6 - -

Price per shares (Rs) - 830.2 - - Post- QIP @ Rs 1,000 per share FY23A FY24E FY25E FY26E
Total Amount Raised (Rs Cr) - 476.1 - - No. of Share Issued (QIB) 3.6 0.6 - -
No. of Shares (Cr) 3.6 4.2 4.2 4.2 Price per shares (Rs) - 1,000.0 - -
Net Worth (Rs Cr) 257.9 909.1 1,154.5 1,507.0 Total Amount Raised (Rs Cr) - 547.7 - -
Debt (Rs Cr) 521.2 603.1 1,189.6 1,699.2 No. of Shares (Cr) 3.6 4.2 4.2 4.2
D/E (x) 2.0 0.7 1.0 1.1 Net Worth (Rs Cr) 257.9 980.7 1,226.1 1,578.6
EPS (Rs) 30.3 41.8 63.8 90.4 Debt (Rs Cr) 521.2 603.1 1,160.2 1,699.2
BVPS (Rs) 71.4 217.1 275.7 359.9 D/E (x) 2.0 0.6 0.9 1.1
RoE (%) 53.3 30.0 25.9 28.4 EPS (Rs) 30.3 41.8 63.8 90.4
RoCE (%) 29.7 25.3 23.4 23.2 BVPS (Rs) 71.4 234.2 292.8 377.0
P/E (x) 34.3 24.9 16.3 11.5 RoE (%) 53.3 28.3 24.2 27.0
P/BV (x) 14.6 4.8 3.8 2.9 RoCE (%) 29.7 24.5 22.8 22.7
P/E (x) 34.3 24.9 16.3 11.5
P/BV (x) 14.6 4.4 3.6 2.8

Source: Company, SSL Research

1 year Rolling Forward PE (x) 1 year Rolling Forward P/BV (x)

1200
1200 1000
1050
800
900
750 600
600 400
450
300 200
150 0
0
Jul-21

Oct-21

Jul-22

Oct-22

Jul-23

Oct-23
Apr-22

Apr-23
Jan-22

Jan-23
Jul-21

Oct-21

Jul-22

Oct-22

Jul-23

Oct-23
Apr-22

Apr-23
Jan-22

Jan-23

Close Price 3x 6x 9x 12x Close Price 0.8x 2.3x 3.8x 5.3x

Source: Company, SSL Research Source: Company, SSL Research

SBICAP Securities Limited | 10

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Net Debt to EBITDA and Fixed Asset Turnover Ratio Attractive valuation

Net Debt/EBITDA (x) LHS Fixed Asset Turnover (x)- RHS P/E (x)

350.0 327.8
3.0 1.2
2.6 2.6
2.4 300.0
2.5 1.0
2.0 2.1
1.9 250.0
2.0 1.8 0.8
200.0
1.5 0.6 147.1
150.0
1.0 0.4 100.0
49.0 38.5
0.5 0.2 50.0 24.1 15.8 11.2
- - -
FY20A FY21A FY22A FY23A FY24E FY25E FY26E FY20A FY21A FY22A FY23A FY24E FY25E FY26E

Source: Company, SSL Research Source: Company, SSL Research

Key Risks:
IPP is a capital-intensive business as continuous capex is required for asset
creation. However, KPI Green on the other hand also enjoys the advantage of
accelerated depreciation that helps to boost the cash profit.

Leveraged balance sheet as D/E is ~2:1 and also has an element of promoter
pledge as collateral security to the extent of 49%.

Revenue is highly dependent upon inflow of orders and inflow of revenue from
sale of power under long term PPAs. The termination of PPAs or lack of order
inflow may impact the revenue. Additionally, the delayed collection can also
affect the cash flow and its ability to service debt and other obligations.

Regulated business as it requires compliances with multiple government

agencies.

Availability of land is critical for project execution. Spike in lease rentals or rise in
land cost may impact the profitability.

Negative free cashflow as KPI Green is in capex phase which is simultaneously

supported by financing activities and is unlikely for the company to make net free
cashflow.

SBICAP Securities Limited | 11

KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Cash Conversion Cycle (Days) Free Cash Flow (Fig Rs Cr)

Free Cash Flow (Rs Cr)

180 158 63 180 -
160 135 131 70 160 (100.0)
140 73 140 (70.1)
(200.0) (105.0)
120 120 (166.9) (168.0)
(213.0) (183.0)
100 51 100 (300.0)
80 80
60 60 (400.0)
40 40 (500.0)
20 20 (600.0)
- -
FY20A FY21A FY22A FY23A FY24E FY25E FY26E (700.0)
(800.0)
(900.0) (795.8)
Debtors Period (days) Creditors Period (days)
Inventory Period (days) Cash Con. Cycle (days) FY20A FY21A FY22A FY23A FY24E FY25E FY26E

Source: Company, SSL Research Source: Company, SSL Research

Operating cash flow (Fig Rs Cr) Capex (Fig Rs Cr)

600.0 529.2 1,325.0

1,400.0
500.0 1,200.0
400.0 367.0
1,000.0
300.0 800.0
550.0
200.0 142.7 600.0
85.6 310.6
100.0 48.6 400.0
139.0 190.6 162.6
200.0 118.7
-
(27.9) -
(100.0) (50.4) 2020A 2021A 2022A 2023A 2024E 2025E 2026E
2020A 2021A 2022A 2023A 2024E 2025E 2026E

Source: Company, SSL Research Source: Company, SSL Research

About Company:

KPI Green Energy Limited (Formerly known as KPI Global Infrastructure Limited),
is the solar and hybrid vertical of KP Group. It is a prominent Gujarat based solar
and hybrid power generating company.

Business Model:
KPI Green is a solar power generating company focused on providing solar power,
both as an Independent Power Producer (“IPP”) under the brand name of
‘Solarism’ and as service provider to Captive Power Producer (“CPP”) customers.

Under IPP, the Company own, operate and maintain grid connected solar power
projects as IPP and generate revenue by entering into Power Purchase
Agreements (“PPA”) with third parties for selling power units generated through
solar projects. IPP is an asset heavy business model which requires upfront capex
to build solar power plants and sell the power generated to clients through long
term PPAs. The PPAs signed with clients has clause to evacuate upto 95% of power
generated. Any shortfall is simultaneously compensated by client. The unsold
power is then supplied to Discom at Rs 3.3 per unit.

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KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Under CPP, the company develop, transfer, operate and maintain grid connected
solar power projects for CPP customers and generate revenue by selling these
projects to CPP customers for their captive use requirements.

Captive Power Producers are those entities who install a power project for their
own captive consumption. The units generated from such projects are directly
credited to the CPP’s bill and subtracted from the units supplied by DISCOM,
proving to be economically more viable and prudent source of power. Here KPI
Green enters into a turnkey agreement for supplying the developed solar power
project for CPP clients.

Unlike IPP, CPP is a asset light business model where company has to manage
working capital which is very similar to any EPC (Engineering, Procurement and
Construction) company

Geographical Presence

Source: Company, SSL Research

Source: Company, SSL Research Source: Company, SSL Research

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 KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Corporate Structure:

KP Group

KPI Green Energy (Listed on Other Entities

KP Energy (Listed on BSE) KP Green Energy Pvt. Ltd.
BSE/NSE)

Belampur power Infra LLP Quyosh Energia Pvt. Ltd

KPIG Energia (100%
Subsidiary) Hajipir Renewable Energy LLP Kpzon Energia Pvt. Ltd
Kpark Sunbeat Pvt. Ltd
HGV DTL Transmission Project Pvt. Ltd (100% Subsidiary)
Kpgenix Sunray Pvt. Ltd
(100% Subsidiary)
Sundrop Energia (100% Kpig Renewables Pvt. Ltd
Subsidiary) KP Energy Mahua Windfarm Pvt. Ltd
KPEV Charging pvt. Ltd
Mahua Power Infra LLP
Solwaves Enrgia Pvt. Ltd
Manar Power Infra LLP
Kpsun Krag Pvt. Ltd
Miyani Power Infra LLP
Renewable Minds LLP
Ungarn Renewable Energy Pvt. Ltd
KPI Green OMS Pvt. Ltd
Vanki Renewable Energy LLP
KPF Green hydrogen and Ammonia
Wind Farm Developers Pvt. Ltd Technology Pvt. Ltd
KP Energy OMS Ltd (100% Subsidiary) KP Humen development
Evergreen Mahua Windfarm Pvt. Ltd Foundation
VG DTL Transmission Project Pvt. Ltd Bharuchi Vahora Patel Surat
(Associate Co.) Federation

Source: Company, SSL Research

Key management personnel

Faruk Gulambhai Patel- CMD: The founder and promoter of 35 companies with
the brand name of KP Group engaged into various businesses mainly Solar, Wind,
Hyrbid and Green Hydrogen Ammonia and Fabrication & Galvanising.

Mr. Shaheedul Hasan- COO: He has a bachelor's degree in Engineering in

Electronics and has more than 28 years of experience, across the lifecycle of a
telecom network and solar power plant

Mr. Salim Yahoo- He is Chief Financial Officer (CFO) of the Company. He heads
the accounts and financial reporting channels of KPI Green Energy. He holds
bachelor’s degree in commerce and Diploma in Business & Administration from
Symbiosis. He has worked with CRISIL Limited as Director – Rating MCG from 2008
to 2018. He has overall experience in finance and accounting field for 28 years.

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 KPI Green Energy Ltd. Initiating Coverage | Sector: Power

Financial Statements
Income Statement Figures in Cr. Cash Flow Statement: Figures in Cr.
Particulars 2022A 2023A 2024E 2025E 2026E Particulars 2022A 2023A 2024E 2025E 2026E
Net Sales 229.8 643.8 919.7 1,382.3 1,948.9
PBT 59.2 141.9 226.0 344.6 488.4
Other Income 1.6 3.2 4.6 6.9 9.7
Depreciation 14.1 22.6 32.7 58.9 86.2
Total Income 231.4 647.0 924.3 1,389.2 1,958.6
Interest (Net) 36.9 46.8 63.7 107.1 154.4
Total Expenditure 121.0 435.3 602.0 878.6 1,229.6
Other Income (1.6) (3.2) (4.6) (6.9) (9.7)
Raw Material Consumed 94.1 382.0 507.2 736.2 1,028.9 Change in WC (6.9) (33.1) (317.3) 103.0 (242.4)
As % of Sales 41.0% 59.3% 55.1% 53.3% 52.8% Direct Taxes Paid (16.1) (32.2) (50.8) (77.5) (109.9)
Other Operating Cost 26.9 53.3 94.7 142.4 200.7 Net operating Cash Flow 85.6 142.7 (50.4) 529.2 367.0
As % of Sales 11.7% 8.3% 10.3% 10.3% 10.3%
EBITDA (Excl OI) 108.7 208.5 317.8 503.8 719.3 (Inc.) / Dec.in Fixed Assets (190.6) (310.6) (162.6) (1,325.0) (550.0)
EBITDA (Incl. OI) 110.3 211.7 322.4 510.7 729.0 Free Cash Flow (105.0) (168.0) (213.0) (795.8) (183.0)
Interest 36.9 46.8 63.7 107.1 154.4 (Inc.) / Dec. in Invest. - (1.5) 1.5 - -
PBDT 73.4 165.0 258.7 403.6 574.6 Other Income 1.6 3.2 4.6 6.9 9.7
Depreciation 14.1 22.6 32.7 58.9 86.2 Cash flow from inv. activities (189.1) (308.9) (156.5) (1,318.1) (540.3)
Exceptional Items 0.1 0.5 - - -
PBT 59.2 141.9 226.0 344.6 488.4 Issue of Shares - - - - -
Tax 16.1 32.2 50.8 77.5 109.9 Change in Debt 99.2 184.3 231.9 636.5 309.6
Net Profit 43.1 109.6 175.1 267.1 378.5 Interest Paid (36.9) (46.8) (63.7) (107.1) (154.4)
Dividend (1.8) (10.3) (14.5) (18.1) (21.7)
Source: Company, SSL Research
Cash flow from fin. activities 60.5 127.2 153.8 511.3 133.4

Balance Sheet Figures in Cr.

Other Adjustment (Net) 46.9 65.8 74.0 222.3 79.0
Equities & Liabilities 2022A 2023A 2024E 2025E 2026E

Share capital 18.1 36.1 36.1 36.1 36.1

Net Change in cash 3.9 26.8 20.9 (55.3) 39.2
Reserves and surplus 135.7 221.8 396.9 664.0 1,042.5 Opening Balance 21.7 25.6 52.4 73.3 18.0
Total Shareholder's Fund 153.7 257.9 433.0 700.1 1,078.6 Closing Balance 25.6 52.4 73.3 18.0 57.2
Non-current liabilities Source: Company, SSL Research
Long Term Borrowings 289.3 409.1 569.1 1,085.5 1,309.4
Key Ratios:
Other Non- Current Liabilities 151.4 217.9 276.9 484.8 546.7
Particulars 2022A 2023A 2024E 2025E 2026E
Current liabilities 182.9 370.0 420.5 659.6 891.0 (A) YoY Growth %
Total Liabilities 777.3 1,255.0 1,699.6 2,930.1 3,825.7 Net Sales 122.0 180.2 42.9 50.3 41.0
EBITDA 70.7 91.7 52.4 58.5 42.8
PBT 163.1 139.6 59.3 52.5 41.7
Net Profit 200.3 154.4 59.7 52.5 41.7
Assets Cash Profit 85.4 131.4 57.1 56.9 42.5
(B) Measures of Op. Performance
Net Fixed Assets 512.9 800.9 930.7 2,196.8 2,660.6
Gross Profit Margin (%) 59.0 40.7 44.9 46.7 47.2
Non-Current Assets 515.3 810.4 937.4 2,206.7 2,674.5 Operating Profit Margin (%) 47.3 32.4 34.6 36.4 36.9
Total Tax Rate (%) 27.2 22.7 22.5 22.5 22.5
Current Assets Net Profit Margin (%) 18.8 17.0 19.0 19.3 19.4
(C) Measures of Fin.Status
Inventories 106.7 165.0 302.4 321.9 453.8
Debt / Equity (x) 2.2 2.0 1.7 2.0 1.6
Trade receivables 36.8 146.7 181.4 227.2 400.5 Net Debt / Equity (x) 2.0 1.8 1.6 2.0 1.5
Debtors Period (days) 69 52 65 54 59
Cash and bank balances 25.6 52.4 73.3 18.0 57.2 Creditors Period (days) 55 78 85 67 68
Inventory Period (days) 117 77 93 82 73
Other Financial Assets 1.3 1.6 1.8 2.8 3.9
Cash Conversion Cycle (Days) 131 51 73 70 63
Loans 0.2 0.5 0.9 1.4 1.9 (D) Measures of Investment
EPS (Rs) 23.9 30.3 48.5 73.9 104.7
Other Current Assets 91.5 78.3 202.3 152.1 233.9 Dividend Per Share (RS) 1.0 2.9 4.0 5.0 6.0
Dividend Yield (%) 0.1 0.3 0.5 0.6 0.7
Total Current Assets 262.0 444.5 762.2 723.4 1,151.2
Earning Yield (%) 2.7 3.4 5.5 8.4 11.9
Total Assets 777.3 1,255.0 1,699.6 2,930.1 3,825.7 ROA (%) 6.9 10.8 11.9 11.5 11.2
Return on Net Worth (%) 32.4 53.3 50.7 47.1 42.6
Source: Company, SSL Research Return on Cap. Employed (%) 22.9 29.7 29.5 27.6 26.4
Interest Coverage (x) 2.6 4.0 4.5 4.2 4.2
(E) Measures of Valuation
P/E (x) 49.1 38.6 24.1 15.8 11.2
M. Cap to Sales (x) 9.2 6.6 4.6 3.1 2.2
EV/Sales (x) 10.6 7.3 5.3 4.1 3.0
EV/EBDITA (x) 22.3 22.5 15.4 11.1 8.2

Source: Company, SSL Research

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KPI Green Energy Ltd. Initiating Coverage | Sector: Power

SBICAP Securities Limited I Rajesh Gupta I Tel.: 022-4366 3524 I email: rajesh.gupta@sbicapsec.com

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The Analysts engaged in preparation of this Report or his/her relative:-

(a) do not have any financial interests in the subject company mentioned in this Report; (b) do not own 1% or more of
the equity securities of the subject company mentioned in the report as of the last day of the month preceding the
publication of the research report; (c) do not have any material conflict of interest at the time of publication of the Report.

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(a) have not received any compensation from the subject company in the past twelve months; (b) have not managed or
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compensation for investment banking or merchant banking or brokerage services from the subject company in the
past twelve months; (d) have not received any compensation for products or services other than investment banking
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for the subject company.

Name Qualification Designation

Sudeep Shah MMS-Finance DVP- Technical & Derivative Research
Sunny Agrawal B.E, MBA (Finance) DVP - Fundamental Research
Rajesh Gupta PGDBM (Finance), MA (Bus. Eco) AVP - Fundamental Research
Monica Chauhan C.A. Research Analyst - Equity Fundamentals
Harsh Vasa C.A. Research Analyst - Equity Fundamentals
Sumeet Shah B.E., CFA Research Analyst - Equity Fundamentals
Sweta Padhi MBA (Finance) Research Analyst - Equity Fundamentals
Gautam Upadhyaya MBA (Finance) Research Analyst - Equity Derivatives
Vinayak Gangule BE (IT) Research Analyst - Equity Technicals
Pratik Patni BSc (Biotech Entire) Research Analyst- Equity Derivatives
Ghanshyam Gupta MBA (Finance) Research Analyst- Currency Derivative
Sagar Peswani B.Tech (ECE) Research Associate - Equity Technicals
Uday Chandgothia B.Tech (Mech), MBA (Finance) Research Associate - Equity Fundamentals
Kalpesh Mangade B.Com MIS Analyst - Retail Research

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