KNR Constructions Ltd. share price target

We maintain a BUY rating on the KNRCL and value the company at 17x FY24E EPS and HAM projects at 1.2x book value to arrive at a target price of Rs 335/share, implying an upside of 29% from the CMP.

Balance sheet improves further

Q3FY22 revenue grew by 11.7% YoY which is below our estimate due to tepid execution of new projects. Despite higher commodity prices, EBITDA margin improved by 103bps YoY to 20.7% due to fall in employee & other expenses. Order book stood at Rs10,009cr (31% YoY) which is 3.2x TTM revenue and adds revenue visibility for two to three years. The company has already received an order inflow of Rs4,000cr...

Price escalation clause in roads agreement, and higher margins at irrigation projects likely to keep operating margin at an elevated level Key Risk: (i) Delay in HAM projects execution; (ii) Any working capital...

Prudent management, net debt free, robust return ratios (RoCE: >23%) Q2FY22 Results: KNR reported a healthy performance in Q2FY22. Standalone revenue improved 25.7% YoY to | 755.6 crore, largely backed...

Order inflow target at Rs20-25bn in H2FY22: H1FY22 Order book at Rs116bn (equals 4x TTM Revenue) comprising Roads / Irrigation at 73% /27%. Q2FY22 order inflow stood at Rs7bn and close FY22E with order inflow of Rs30-35bn. During the quarter company also received an order from the widening of existing service roads of outer ring road, Hyderabad worth Rs21.3bn and 1 HAM project worth Rs10.4bn. Going forward, company is targeting to enter in the railway sector. Outlook on receivables: Q2FY22 Net working capital (NWC) days have reduced to 45 days vs 66 days QoQ. Out of the total receivables from the irrigation project of...

The execution momentum continued in 2QFY22 despite the monsoon. The workforce strength has reached pre-COVID levels. Execution was primarily driven by HAM projects during the quarter....

We value KNRCL EPC business at 17.5x FY24 EPS and HAM portfolio at 1x book value with a target price of Rs 360/share, implying an upside potential of 17% from CMP. We maintain our BUY rating on the stock.

We initiate coverage with a BUY and value the EPC business at 17.5x FY24E EPS and HAM portfolio at 1x book value, to arrive at a target price of Rs.360/share, implying an upside potential of 17% from the current levels.