Buy KNR Constructions; target of Rs 673: Angel Broking

Angel Broking’s research report on KNR ConstructionsKNR Constructions (KNR) reported strong set of 2QFY2016 numbers. On the top-line (standalone) front, it reported 24.9% yoy increase to Rs. 213cr (ahead of our estimate of Rs. 189cr). EBITDA and PAT numbers were ahead of our estimate at Rs. 35cr and Rs. 22cr, respectively (v/s our estimate of Rs. 27cr and Rs. 11cr, respectively). PAT numbers during the quarter benefitted from prior period tax refunds and interest on such tax refunds to the tune of Rs. 33cr. On adjusting for the same, Adj. PAT of KNR was at Rs. 22cr, reflecting an impressive 10.5% Adj. PAT margin. KNR’s order book as of 2QFY2016 stands at Rs. 3,665cr, which gives strong evenue visibility for over the next few quarters.Outlook and Valuation Improved order book, ramp-up in recently won projects, strong earnings growth potential, and comfortable Balance Sheet, strengthen our view that KNR would continue to trade at rich valuations. On valuing the standalone entity at 15.0x our FY2017E EPS of Rs. 38.6, and adding value for its Kerala & Muzaffarpur BOT projects, we arrive at FY2017E sum-of-the-parts (SoTP) based price target of Rs. 673/share, implying 16% upside from the current levels. Given the upside in the stock, we upgrade our rating to Buy. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions

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