Buy KNR Constructions; target of Rs 247: Dolat Capital

Dolat Capital's research report on KNR Constructions

KNR posted results above estimates on all fronts. ? KNR posted (5.6%)/ 1.9%/ (29.0%) YoY growth in revenue/ EBITDA/ Adj. PAT to Rs6.8 bn/ Rs1.5 bn/ Rs672 mn in Q4FY20. ? We reduce our revenue/ PAT estimates by 5.1%/ 9.3% for FY21E/ FY22E on account of loss of revenue due to lockdown caused by covid-19. We broadly maintain our estimates for FY22E. The company is facing labour shortage and is currently operating with 50-65% strength. ? We expect a 17.6%/ 9.7% revenue/ Adj. PAT CAGR over FY20-22E, with EBITDA margins of 17.0% each for FY21E/ FY22E.

Outlook

Considering pick up in execution from Q3FY21E, healthy return ratios, a well-managed balance sheet, comfortable working capital, low D:E, and quality management, we maintain BUY with a SOTP-based TP to Rs247 (12x FY22E EPS and 1.2x PB for HAM + BOT investment). We have excluded KNR Walayar Tollways valuation from our SOTP as KNR has signed a deal with Cube Highways for sale at EV of Rs5.3 bn

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