Motilal Oswal's research report on KNR Construction
Revenues stood at INR4.5b (+3.6% YoY), in line with our estimate of INR4.4b, led by timely execution of the KP Sagar Irrigation project (INR960m revenue contribution; 20% of 3QFY19 sales), Hubli (INR600m), Madurai (INR400m), Trivandrum (INR520m) and Yedulla (INR410m). EBIDTA at INR901m (- 8% YoY) was ahead of our estimate of INR740m. Operating margins declined 260bp YoY to 20%, but was ahead of our estimate of 17.0%. Better-than-estimated margins were due to the better revenue mix (20% revenue contribution from KP Sagar Irrigation project, where margins are in excess of 20%+). PAT declined 21% YoY to INR521m, exceeding our estimate of INR339m.
Outlook
We maintain our Buy rating, with target price of INR260 and value KNRC on SOTP basis - INR216/share for standalone EPC business (15x FY20E EPS of INR16.9), and INR43/share for investments in the BOT projects, annuity projects and land parcels (1x book value).
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