MOSL: KNR CONSTRUCTION (Buy)-Beat driven by better revenue mix
KNR Construction: Beat driven by better revenue mix
(KNRC IN, Mkt Cap USD0.4b, CMP INR201, TP INR260, 29% Upside, Buy)
- Operating performance better-than-expected: Revenues stood at INR4.5b (+3.6% YoY), in line with our estimate of INR4.4b, led by timely execution of the KP Sagar Irrigation project (INR960m revenue contribution; 20% of 3QFY19 sales), Hubli (INR600m), Madurai (INR400m), Trivandrum (INR520m) and Yedulla (INR410m). EBIDTA at INR901m (- 8% YoY) was ahead of our estimate of INR740m. Operating margins declined 260bp YoY to 20%, but was ahead of our estimate of 17.0%. Better-than-estimated margins were due to the better revenue mix (20% revenue contribution from KP Sagar Irrigation project, where margins are in excess of 20%+). PAT declined 21% YoY to INR521m, exceeding our estimate of INR339m.
- Order backlog provides strong medium-term revenue visibility: As at Dec'18, order backlog stood at INR55.2b (including EPC value of HAM project), providing visibility of 2.9x its FY18 revenue. Of the total order book of INR55.2b, 94% comes in from Roads with the balance coming from the Irrigation segment. KNR expects order inflow of INR20b to be finalized in FY19 from Irrigation and Road sectors.
- SPA signed with Cube Highways for three HAM projects: KNR has entered into share purchase agreement (SPA) with Cube Highways for three HAM projects (Srirangam, Tirumala and Chidambaram) worth INR2.6b, as against an investment of INR1.5b, valued at 1.8x its investment (excluding the opportunity cost on investment). KNR has achieved financial closure for all four HAM projects and has also received appointed date for the Tirumala project. It expects to receive the appointed date for two more projects (Chidambaram and Trichy) by Feb'19.
KNR Constructions Limited. KNR Constructions Limited is an India-based holding company. The Company is a multi-domain infrastructure project development company. The Company undertakes engineering, procurement and construction (EPC) contracts, as well as build-operate-transfer (BOT) projects across various sectors, such as construction and maintenance of roads, highways, flyovers and bridges. Its range of verticals also include irrigation projects, water management, agriculture and trading business. It has completed approximately 5,890 kilometers of projects across over 10 states in India. Its urban water infrastructure management project is Challaghatta Main Valley Project, which involves the remodeling of primary and secondary storm drains, bridges/culverts and related works in Challaghatta Main Valley in Bangalore City. The Company's irrigation and water management projects include Shankara Samudram Balancing Reservoir, Eastern Kosi Canal system, Reservoir across Mathadivagu and Budpur Balancing Reservoir.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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