KNR Constructions Ltd. share price target

KNR's revenue grew 5.8% YoY in Q2FY19 to `4.2bn (18.1% above estimates) led by robust execution. EBITDA margin down 100 bps YoY to 20.0% (319 bps above estimates) due to higher other expenses and employee costs which was partially offset by lower construction costs by 67 bps YoY to 63.2% of revenue. Reported PAT down 23.8% YoY to `450 mn (122.2% above estimates) due to muted operating performance coupled with higher depreciation and higher interest expense which was partially offset by rise in other income....

We maintain BUY with an increased SOTP valuation of Rs 331/sh. KNR delivered Rev/EBIDTA/PAT beat of 3/18/9%. We continue to believe that KNR will deliver YoY muted growth revenue, guidance beat. 1HFY19 already achieved 50% revenue and with stronger 2HFY18 we are building in 5.6% revenue growth. 2QFY19 EBIDTA margin stood at 20%, we estimate sustainable margins to be around 16-17% and have upgraded our FY19/20E APAT by 21/10% to reflect the same.

Annual Report 2018: Four Decades of Engineering Excellence The annual report theme encompasses four decades of engineering excellence in the field of infrastructure such as roads, irrigation and water management works. KNR maintains its market position by continuously focusing on engineering excellence, improving and sharpening competencies, adapting latest construction technologies, deployment of sophisticated construction equipment and timely delivery. KNR reported revenue growth of 25.3% YoY in FY18. EBITDA...

YoY to INR5.6b, exceeding our estimate of INR4.9b, supported by smooth execution of projects in hand. Key projects contributing to revenue were KP Sagar Irrigation Project (INR1.7b; 30% of revenue), Yedula (INR500m), Madurai (INR540m) and Pollachi (INR450m). Operating profit of INR1.1b 14 August 2018 (+30% YoY), too, was above our estimate of INR0.74b, supported by better- than-expected execution. Operating margin expanded 210bp YoY to 19.7%, ahead of our estimate of 15.2%. PAT grew 10% YoY to INR740m, exceeding our estimate of INR417m. Tax rate stood at 12.3% v/s our estimate of 10%. 2018, order backlog stood at INR59.

We continue to maintainBUY with and increased SOTP of Rs 392/sh. KNRC continues to outperform its growth guidance and delivered strong 1QFY19 revenue at Rs 5.6bn which was 18.4% above estimates. EBITDA at Rs 1.1bn was 35.7% above our estimates, with EBITDA margins expanding to 19.7% (+215bps YoY, +42bps QoQ). We estimate sustainable margins to be around 16-17% and have revised our estimates to reflect the same. APAT beat stood at 57.5%.

2 August 2018 Infrastructure KNRC has received in principle financial sanctions for three of the four HAM projects the company has won from NHAI and the fourth project is expected to achieve financial closure by August 2018. Full financial closure should happen once KNRC has 80% land available on 3H basis to execute the projects. With financial sanctions in place for the three projects, focus will now be on NHAI making 80% of the land available, which will aid timely execution of the projects in hand. KNRC is in advanced-stage talks to rope in an equity partner in the four NHAI HAM projects it has won. The financial partner will infuse money by way of optionally- convertible bonds during the construction stage, the bonds will have 14% cost of borrowing, and on completion of the project, the bonds will be converted to equity. Total equity investment in the Muzzafarpur project stands at INR9b.

Spike in execution from 2HFY19E post dip in 1HFY19E KNR's revenue grew 29.5% YoY in Q4FY18 to `6.2bn (19.2% above estimates) led by better execution. The EBITDA margin expanded 435bps YoY to 22.3% (135bps above estimates) due to lower subcontracting costs and few projects nearing completion having better margins. Depreciation has increased sharply by 152% YoY (up 32.2% QoQ) to `491mn due to higher asset utilization for couple of irrigation projects with shorter execution period. Adj. PAT grew sharply by 52.1% YoY to `797mn (81.7% above...

KNR constructions (KNR), one of best managed road constructer with light balance sheet, low working capital and one of the highest RoCE among peers, reported its Q4FY18 numbers.

KNR Constructions (KNRC) continued to report healthy performance in 4QFY18, led by superior execution and strong margins. Its reported revenue grew by 30% YoY and 44% QoQ to Rs6.2bn, while EBITDA surged by 67% YoY and 23% QoQ to Rs1.2bn. Order inflow from EPC remained muted during FY18 as EPC order intake (barring HAM) stood at Rs5.6bn during the year, taking order backlog to Rs23bn (1.2x FY18 revenue) as of FY18-end. Considering the recently won HAM projects (5 projects with an aggregate value of Rs56bn), KNRC can add Rs39.8bn to its EPC order book out of these HAM projects, which is likely to ensure sustainable growth for standalone business. KNRC expects EPC revenue flow from these HAM projects to start from 3QFY19...

4QFY18 revenue grew 29.5% YoY to INR6.2b, beating our estimate of INR4.9b, supported by smooth execution of projects in hand. Operating profit grew 67% YoY to INR1.2b, ahead of our estimate of INR0.98b, supported by better than expected 31 May 2018 4QFY18 Result Update Infrastructure execution. Operating margin expanded 430bp YoY to 19.3%, missing our estimate of 19.8%. PAT grew 52.1% YoY to INR798m, beating our estimate of INR450m, given lower than estimated tax rate (1.7% v/s estimate of 28.3%) and higher than estimated other income (INR183m v/s estimate of INR92m). 2018, order backlog stood at INR23.