Motilal Oswal's research report on KNR Constructions
KNRC sits on a strong order book of ~INR100b (excluding recently won projects), which provides clear revenue visibility for the next three years. It has received appointed dates (AD) for two HAM projects in Jan’22 and financial closure (FC) in one HAM project in Apr’22, which will support execution in FY23E and FY24E. We expect margin to stay elevated, despite inflationary pressures from higher commodity prices, as a sizable portion (~26%) of its order book consists of irrigation projects. KNRC has strengthened its Balance Sheet further by monetizing two of its HAM projects via stake sale to Cube Highways, which allows it to bid for new projects. With an order book of ~INR100b, we expect KNRC to clock 20% revenue growth over FY21-24, with EBITDA margin in the 18-20% range.
We maintain our Buy rating, with a SoTP-based TP of INR360/share, implying an upside of 29%. Our TP is premised on: a) 16x FY24E EPS for the EPC business, and b) P/Inv of 1.2x for its Road assets.
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