Buy KNR Constructions; target of Rs 250: Dolat Capital

Dolat Capital's research report on KNR Constructions

We downgrade our revenue estimates by 5.6%/ 13.7% for FY19E/ FY20E due to delay in receiving appointed date for 5 HAM projects. We upgrade/ maintain our FY19E/ FY20E EBITDA margins by 115bps to 19.1%/ 16% on the back of 9MFY19 results. We factor 11.6% tax rate for FY19E vs. 15% earlier. Accordingly, we upgrade/ downgrade our PAT estimates for FY19E/ FY20E by 4.3%/ 18.0%. We estimate revenue growth of 4.5%/ 30.1%/ 19.8% in FY19E/ FY20E/ FY21E. Our revenue estimates of `20.2 bn/ `26.3 bn for FY19E/ FY20E are higher than management guidance of `18-19bn/ `23-24bn, respectively.

Outlook

Though stock has corrected ~29% during YTDFY19, the upside potential likely to remain restricted in near term as we expect ~35%/ ~0.2% de-growth in PAT in Q4FY19E/ FY20E. However, considering healthy return ratios, well managed balance sheet, comfortable working capital, low D:E and quality management, we maintain BUY with a revised SOTP of `250 (Exhibit 1).

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