CRISIL Research has come out with its report KNR Constructions. According to the research firm, company has a strong order backlog of Rs 22 bn but a few projects face execution-related issues. It has two projects worth Rs 6.8 bn from GVK, which are yet to start due to delays in FC. Work on these projects are expected to start from H1FY14.
CRISIL Research has come out with its report KNR Constructions . According to the research firm, company has a strong order backlog of Rs 22 bn but a few projects face execution-related issues. It has two projects worth Rs 6.8 bn from GVK, which are yet to start due to delays in FC. Work on these projects are expected to start from H1FY14.
KNR’s Q2FY13 results were below CRISIL Research’s expectations. Revenues declined by 33% y-o-y (excluding Rs 150 mn on account of early completion bonus for the Bijapur-Hungund road project) to Rs 1,240 mn due to slow execution of the current order book. EBITDA margin (excluding the bonus) declined by 787 bps y-o-y to 10.3% as fixed costs were not fully absorbed due to the decline in revenues. Adjusted PAT decreased 95% y-o-y to Rs 6 mn. In July 2012, KNR exited from a project worth Rs 6.2 bn from GMR Infrastructure Ltd due to cost escalation issues. Further, in September 2012, due to land clearance issues in Sadbhav Engineering’s Chhindwara project, the scope of work changed from Rs 3.1 bn to Rs 1.5 bn. Post these adjustments, its current order book is Rs 22 bn (3.6x TTM standalone revenues). The Kerala-based road BOT project (worth Rs 7 bn), for which KNR is yet to sign the LOA and obtain financial closure (FC), has not been included in the current order book. Due to delay in achieving FC, work on orders from GVK Power & Infra (30% of the current order book) is yet to start. Given the more-than-anticipated delays in execution and shrinkage in order book, we lower our earnings estimates. We maintain our fundamental grade of 3/5 but timely execution of the current order book is a key monitorable.
Strong backlog but status quo on 30% of orders; slow progress on Kerala project’s FC
Received early completion bonus of Rs 150 mn during the quarter
Earnings estimates revised downwards; fair value revised to Rs 120 per share
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