Buy KNR Constructions; target of Rs 369: Dolat Capital

Dolat Capital's research report on KNR Constructions

KNR’s revenue grew 5.8% YoY in Q2FY19 to `4.2bn (18.1% above estimates) led by robust execution. EBITDA margin down 100 bps YoY to 20.0% (319 bps above estimates) due to higher other expenses and employee costs which was partially offset by lower construction costs by 67 bps YoY to 63.2% of revenue. Reported PAT down 23.8% YoY to `450 mn (122.2% above estimates) due to muted operating performance coupled with higher depreciation and higher interest expense which was partially offset by rise in other income.

Outlook

However, considering healthy return ratios, well managed balance sheet, comfortable working capital, low D:E and attractive valuations, we maintain BUY with a revised SOTP of `369.

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