MOSL: KNR CONSTRUCTION (Buy)- Yet another quarter of strong performance
KNR CONSTRUCTION: Yet another quarter of strong performance
(KNRC IN, Mkt Cap USD0.5b, CMP INR277, TP INR374, 35% Upside, Buy)
Going from strength to strength
- KNR Construction (KNR) has continued its strong operating performance, with top line/EBITDA growth of 24%/38% – the best performance in our coverage universe. Tax rate was higher during the quarter as the company did not avail much MAT credit as execution was led by newer projects. Order book stands strong at INR65b (including L1), giving strong revenue visibility.
- KNR continues to surprise with its steady performance. The net cash balance sheet, thanks to timely monetization of road assets, provides key competitive advantage in bidding for newer projects. It also depicts strong execution despite financing challenges in the sector as dependency on bank financing is minimal. We maintain our Buy rating with unchanged TP of INR374, based on Sep’21E EPS.
Irrigation projects lead to margin surprise; order book remains strong
- 3QFY20 revenue was up 24% YoY at INR5.6b, broadly in line with our estimate. EBITDA increased 38% YoY to INR1.2b (10% beat), with margin expanding 220bp YoY to 22.3%, due to greater contribution from high-margin irrigation projects. PBT grew 10% YoY to INR655m (in-line), even though other income was down YoY from INR217m to INR70m. Effective tax rate stood at 28%, which is above our estimate as it didn’t avail much MAT credit as execution was led by newer projects. Thus, a PAT declined 10% YoY to INR469m (15% miss).
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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