Buy KNR Constructions; target of Rs 418: Dolat Capital

Dolat Capital's research report on KNR Constructions

The annual report theme encompasses four decades of engineering excellence in the field of infrastructure such as roads, irrigation and water management works. KNR maintains its market position by continuously focusing on engineering excellence, improving and sharpening competencies, adapting latest construction technologies, deployment of sophisticated construction equipment and timely delivery. KNR reported revenue growth of 25.3% YoY in FY18. EBITDA margins expanded 509bps YoY to 20% led by operational efficiencies in addition to lower sub-contracting cost. Reported PAT grew 73% YoY to `2.7bn, however, after adjusting exceptional gains of ` 236mn in FY18 vs. loss of ` 109mn (FY17), Adj. PAT grew 47.8%.

Outlook

We expect KNR to witness healthy revenue growth over FY18-20E, supported by healthy margins and return ratios coupled with well managed balance sheet, comfortable working capital and low D:E ratio. Hence, we maintain Buy with a SOTP of `418.