3 hot stock picks from Geojit Financial Services

Reported healthy revenue growth of 23 percent YoY in Q4FY17 on account of strong execution while margin contracted due to higher subcontracting expenses. The current order book stands at Rs 3,553 crore which is 2.5x FY17 revenue which provides visibility over the next 2-3 years.

The debt-to-equity stands at 0.2x in FY17; this is because of better working capital management, completion of loss-making contracts. Given strong execution capability & focus to become debt-free by FY19E will attract premium valuation. We expect revenue & PAT to grow at a CAGR of 14 percent & 31% over FY17-FY19E.

Endurance Technologies Ltd

Rating: Accumulate

Endurance Technologies (ENDU) is one of the largest 2W & 3W automotive component  manufacturers in India (70 percent of overall revenue).

The company is better placed than peers given its scalable business model, diversified offerings, Tier-1 supplier status & superior return ratios with RoCE of more than 20 percent. Notably, the balance sheet remains healthy with D/E ratio of 0.3x in FY17 and is likely to decline to 0.1x by FY19E owing to strong free cash flow.

We expect revenue/PAT to grow at a CAGR of 14 percent/26 percent over FY17-19E. Further, EBITDA margin is expected to expand by 100bps over FY17-19E to 14.3 percent driven by increase in content per vehicle due to exploring opportunities in CVT (continuous variable transmission) space & cross selling opportunity among existing customers.

KNR Construction Ltd

Rating: BUY

KNR Constructions (KNR) is a leading EPC player largely focusing on national and state highway projects. KNR has successfully executed ~6,000 lane km road projects across 12 states in India.

Q4FY17 revenue grew by 63 percent aided by robust order booking. Order book remain strong @ 2.4x FY17 revenue and the total outstanding order book stands at Rs 3,769 crore a growth of 9 percent YoY. We expect execution will ramp up as the construction work of Hubli-Hospet NH has started and the revenue will start to reflect from Q1FY18. Improving execution coupled with strong order book will stimulate revenue to grow by 14 percent CAGR over FY17-19E. Sound balance sheet (standalone D/E 0.1x FY17) and earnings visibility keep KNR in premium valuation.

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