19 August 2020 KNR Construction (KNR) outperformed in terms of execution by reporting revenue growth v/s our expectation of 35% YoY decline. The EBITDA margin expanded YoY on account of the rising share of higher margin irrigation projects, resulting in a strong beat on earnings. Including L1 orders, the order book (OB) stood strong at INR78.5b, implying OB/rev at 3.5x and providing healthy revenue visibility. KNR continues to surprise with its steady performance. However, the working capital cycle has witnessed marginal deterioration. This is primarily on account of pending dues from the Telangana government, which have been stalled since Feb20 and currently stand at INR6.8b. The management hopes to receive INR4.4b within the next few weeks. Factoring the strong performance in 1QFY21, we increase our FY21/FY22E EPS by 28%/7%. We maintain our (b) the book value of road assets.