Dolat Capital is bullish on KNR Constructions has recommended accumulate rating on the stock with a target price of Rs 324 in its research report dated February 15, 2018.
Dolat Capital's report on KNR Constructions
KNR’s revenue grew 13.3% YoY in Q3FY18 to `4.3bn (8.6% below estimates) driven by execution in its key projects.The EBITDA margin expanded 762bps YoY to 22.7% (592bps above estimates) due to lower subcontracting costs and few projects are nearing completion having better margins. Depreciation amount increased 123.9% YoY to `371mn due to higher asset utilization for couple of irrigation projects which need to be executed over 1-1.5 years.
OutlookWe expect KNR to witness healthy revenue growth over FY17-20E, healthy margins and return ratios coupled with well managed balance sheet, comfortable working capital and low D:E. However, recent surge in stock price by 26% (last 3 months) leaves limited upside. Hence, we downgrade to Accumulate with a revised SOTP of `324 (Exhibit 1).
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