MOSL: KNR CONSTRUCTION (Buy)-Beat led by execution of better margin orders
KNR Construction: Beat led by execution of better margin orders
(KNRC IN, Mkt Cap USD0.6b, CMP INR280, TP INR322, 15% Upside, Buy)
- Operating performance better than expected: 4QFY19 revenue stood at INR7.2b (+14.6% YoY), meaningfully ahead of our est. of INR5.3b. The robust growth was led by timely execution of the (a) KP Sagar Irrigation project (INR1.4b sales; 20% of 4QFY19 sales), (b) Chitoor Mallavaram HAM project (INR1.3b, 18% of 4QFY19 sales), (c) Trivandrum (INR700m), (d) Hubli (INR670m), and (e) Pollachi (INR520m). EBIDTA at INR1.4b (+ 19% YoY) was ahead of our est. of INR1.0b. Operating margins stood at 20% (+ 80bp YoY), ahead of our est. of 19.2% and were supported by execution of better margin orders. Key projects like KP Sagar Irrigation (25%+ EBIDTA margins), and projects like Trivandrum and Yedulla, which are nearing completion led to margins being at 20%. Adj PAT at INR947m (+ 19% YoY) was ahead of our estimate of INR319m.
- Order backlog provides strong medium-term revenue visibility: As at Mar’19, order backlog stood at INR59.2b (including EPC value of KSHIP and newly won HAM project), providing visibility of 3.0x its FY19 revenue. Of the total order book of INR59.2b, Roads contribute 97% with the balance coming from the Irrigation segment. Executable order book currently stands at INR40b. KNR expects order inflow of INR25b to be finalized in FY20 from the Irrigation and Road sectors.
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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