Buy KNR Constructions; target of Rs 407: Dolat Capital

Dolat Capital's research report on KNR Constructions

KNR’s revenue grew 29.5% YoY in Q4FY18 to `6.2bn (19.2% above estimates) led by better execution. The EBITDA margin expanded 435bps YoY to 22.3% (135bps above estimates) due to lower subcontracting costs and few projects nearing completion having better margins. Depreciation has increased sharply by 152% YoY (up 32.2% QoQ) to `491mn due to higher asset utilization for couple of irrigation projects with shorter execution period. Adj. PAT grew sharply by 52.1% YoY to `797mn (81.7% above estimates) led by better operating performance.

Outlook

We expect KNR to witness healthy revenue growth over FY18-20E, healthy margins and return ratios coupled with well managed balance sheet, comfortable working capital and low D:E. Hence, we maintain BUY with a revised SOTP of `407.