Buy KNR Constructions; target of Rs 115: AnandRathi
AnandRathi is bullish on KNR Constructions (KNR) and has recommended buy rating on the stock with a target of Rs 115 in its June 11, 2013 research report.
June 12, 2013 / 11:38 IST
AnandRathi's research report on KNR Constructions (KNR)
"KNR Constructions (KNR) has an order book of Rs 20bn (2.9x TTM revenue), after deducting Rs 6.8bn order from GVK. In FY13, it bagged orders of Rs 10bn, and is aiming at another Rs 13bn in FY14. Management is geared up to bid for upcoming EPC contracts from NHAI and is currently negotiating with private developers for orders. Apart from roads, it is also focused on diversifying into urban infra, irrigation and bridges. Revenues likely to improve. For FY13, the companyRs s revenue declined 8 percent yoy, despite receiving Rs 480m early-completion bonus (Bijapur-Hungund tollroad). Most of the benefit of the bonus was lost as a lot of equipment was idle during the year. In 4QFY13, however, revenue grew 41 percent yoy, higher than we estimated, following strong project execution in Karnataka and Nagpur. With execution now picking up at its Kerela project (own BOT), management is aiming at revenue of Rs 9bn for FY14.""EBITDA margin to stabilise. For FY13, KNR clocked EBITDA margin of 16.4 percent (vs 17.7 percent in FY12). We estimate margins to be maintained at ~16.5 percent over the next two years, backed by strong revenue growth. Update on BOT projects. In MayRs 13, KNR completed financial closure on the Kerala project. So far, it has invested equity of Rs 700m (of the total Rs 1.36bn committed), funded through internal accruals (Rs 300m) and loans (Rs 400m). Moreover, the company has obtained all environmental and forest clearances and work on the project has begun in 4QFY13. Further, it is working on issuing NCDs to raise ~Rs 400m from its BOT project in AP, slated to be used to fund the remaining equity requirement for Kerala project.""Our take. Strong revenue growth is likely in FY14 with significant contribution of its own BOT projects. We retain Buy with TP of Rs 115. Our SOTP target is based on 5x FY14e earnings, a 33 percent discount to other midcap construction companies (Rs 105) and 1x BV of investments (Rs 10). Risks. Slow road awards, high input costs, delay in obtaining clearances by clients," says AnandRathi research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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