Angel Broking neutral on KNR Constructions

Angel Broking's report on KNR ConstructionsKNR Constructions (KNR) reported a poor set of numbers for 1QFY2016. On the top-line (standalone) front, it reported a 27.6% yoy decline to `171cr. Further, EBITDA and PAT numbers reported yoy decline, but at a lower pace than the topline, indicting yoy margin expansion. Sharp decline in sub-contracting and other expenses contributed to 122bp yoy EBITDA margin expansion to 14.4%. EBITDA margin expansion coupled with higher other income helped KNR report improvement in its PAT margins to 8.8% for the quarter. KNR’s order book as of 1QFY2016 stands at ~`3,541cr, which gives strong revenue visibility for over the next few quarters. Valuation: Improved order book, strong earnings growth potential, and comfortable Balance Sheet, strengthen our view that KNR would continue to trade at rich valuations. On valuing the standalone entity at 14.0x our FY2017E EPS of `37, and adding up free cash flow to equity shareholders value for its Kerala based BOT project, we arrive at FY2017E sum-of-the-parts (SoTP) based price target of `582/share, implying that the KNR stock is close to its fair value. Given the limited upside potential the stock has from current levels, we maintain our Neutral rating on the stock, says Angel Broking research report.For all recommendations, click here 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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