Buy KNR Constructions; target of Rs 392: HDFC Securities

HDFC Securities' research report on KNR Constructions

KNRC continues to outperform its growth guidance and delivered strong 1QFY19 revenue at Rs 5.6bn which was 18.4% above estimates. EBITDA at Rs 1.1bn was 35.7% above our estimates, with EBITDA margins expanding to 19.7% (+215bps YoY, +42bps QoQ). We estimate sustainable margins to be around 16-17% and have revised our estimates to reflect the same. APAT beat stood at 57.5%. Order book is Rs 59.5bn with Rs 2bn addition in Arunachal Pradesh project scope. KNRC is focusing on completing financial closure of its 5 HAM projects (EPC value – Rs 39.8bn) that were won in 4QFY18. KNR has announced FC for 3 and 4th HAM FC is expected in Aug-18. KNR continues to maintain a lean WC capital cycle with NWC days at 30, especially demonstrating strong control on receivables (28days) as compared to 50-75 days for other listed peers.

Outlook

We continue to maintain BUY with and increased SOTP of Rs 392/sh.