FREE

MOSL: KNR CONSTRUCTION (Buy)-Performance beat driven by better-than-expected execution

KNR Construction: Performance beat driven by better-than-expected execution

(KNRC IN, Mkt Cap USD0.6b, CMP INR298, TP INR375, 26% Upside, Buy)

 

• Operating performance better than expected: 4QFY18 revenue grew 29.5% YoY to INR6.2b, beating our estimate of INR4.9b, supported by smooth execution of projects in hand. Operating profit grew 67% YoY to INR1.2b, ahead of our estimate of INR0.98b, supported by better than expected execution. Operating margin expanded 430bp YoY to 19.3%, missing our estimate of 19.8%. PAT grew 52.1% YoY to INR798m, beating our estimate of INR450m, given lower than estimated tax rate (1.7% v/s estimate of 28.3%) and higher than estimated other income (INR183m v/s estimate of INR92m).
• Order backlog provides strong medium-term revenue visibility: As at March 2018, order backlog stood at INR23.3b. Incrementally, KNRC has bagged five HAM projects, with EPC business opportunity of INR39.8b, taking the total order backlog to INR63.1b, providing revenue visibility of 3.3x its FY18 revenue. Of the total order book of INR63.14b, 89% comes from the road segment and the balance from the irrigation segment.
• BoT portfolio stabilizes with both projects now fully commissioned: Both of KNRC’s projects are 100% complete. In 4QFY18, toll collection was INR1.6m/day for Kerala BoT as well as Muzzafarpur-Baurani project.