Buy Karda Constructions; target of Rs 120: Khambatta Securities

Khambatta Securities' research report on Karda Constructions

Karda Constructions Limited’s (KCL’s) operating revenues increased 8.4% to Rs 114.1 crore in FY20 in spite of overall economic slowdown. EBITDA came in at Rs 27.4 crore while EBITDA margin at 24.0% was ~440 bps lower primarily on account of higher other expenses. PAT was Rs 9.6 crore while PAT margin of 8.4% was down ~300 bps with the operating margin decline partly offset by a lower effective tax rate.

Outlook

The stock currently trades at an attractive valuation of 11.6x FY22E EPS. Retaining the target P/E multiple of 18.0x and extending the earnings horizon for our valuation to FY22E, we value KCL at Rs 120, informing a BUY rating with an upside potential of 55%.

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