Buy KNR Constructions; target of Rs 259: Geojit

Geojit's research report on KNR Constructions

Order book grew by 30% YoY aided by ~Rs4,000cr of inflows in 9MFY21 and with strong order pipeline KNR is targeting for ~Rs 4,000cr of new orders in Q4FY21. Q3FY21 revenue grew by 23% YoY as execution efficiency normalised to pre-Covid level. EBITDA margin declined by 259bps YoY to 19.7% due to higher sub-contracting and employee cost. We expect execution to improve in the coming quarters due to increasing order book and labour availability. KNR is diversifying its operation to water and urban infra projects. The road and irrigation projects now constitutes 55:45 of order book.

Outlook

We maintain our BUY rating and value core business at a P/E of 15x on FY23E EPS and BOT/HAM projects at 1xP/B to arrive at SOTP target price of Rs259.