CRISIL assigns valuation grade of 4/5 to KNR Construction

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CRISIL assigns valuation grade of 4/5 to KNR Construction

CRISIL Research has come out with its report on KNR Construction. The research firm has maintained the fundamental grade of 3/5 to the company in its February 16, 2012 report.

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KNR Construct BSE | NSE 31/05/12 Are Mutual Funds betting on KNR Construct?

CRISIL Research has come out with its report on KNR Construction . The research firm has maintained the fundamental grade of 3/5 to the company in its February 16, 2012 report.

KNR Construction Ltd (KNR) reported strong numbers for Q3FY12. While standalone revenue was slightly below CRISIL Research's estimates, earnings were higher than expected. Though revenues registered healthy y-o-y growth of 18.9%, it was slightly below our expectations. Standalone EBITDA margin improved by ~740 bps to 15.3% due to lower operating expense and was above our expectations. We believe consolidated margin would be lower than standalone's as JV projects typically have lower margins. We will provide clarity on the same post our interaction with the management. Due to higher operating profit and low tax provisioning, PAT increased from Rs 55 mn in Q3FY11 to Rs 168 mn in Q3FY12 and was higher than our expectations. Order intake for the quarter was strong as the company received ~Rs 14 bn worth of orders. We may raise our estimates post interaction with the management. We maintain the fundamental grade of 3/5.

Q3FY12 result analysis (standalone)
• Revenues grew by 18.9% y-o-y to Rs 1,899 mn due to timely execution of projects. 9MFY12 revenue grew by 5.3% to Rs 5,881 mn.

• EBITDA margin increased by 740 bps y-o-y to 21.6% due to lower other expenses which offset the increase in raw material and employee cost. 9MFY12 EBITDA margin was up by 460 bps y-o-y to 19.0%.

• PAT increased from Rs 55 mn in Q3FY11 to Rs 168 mn in Q3FY12 due to higher operating margins. Accordingly, EPS was Rs 6.0 vs. Rs 2.0 in Q3FY11.

Valuations: Current market price has upside
We continue to value KNR based on the sum-of-the-parts method. Our fair value is Rs 157 per share. We may revise our fair value estimate post our interaction with the management. At the current market price, the stock merits a valuation grade of 4/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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