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MOSL: KNR CONSTRUCTIONS (Buy)-Well placed to seize abundant opportunities in the South

KNR CONSTRUCTIONS: Well placed to seize abundant opportunities in the South; Remain upbeat on medium-term business prospects; Buy
(KNRC IN, Mkt Cap USD0.7b, CMP INR303, TP INR375, 24% Upside, Buy)

The government has lined up a strong awarding pipeline for February-March 2018, with live tenders of 7,768km (INR1.4t) intended to be finalized by March 2018. Another 1,000km is planned to be added in February 2018, taking project tenders available for finalization to 8,768km.
The southern region – 30% of the NHAI’s overall awarding pie in value terms and 27% in km terms over the next two months – provides exciting opportunities.
We believe the South-focused KNRC would be able to ramp up its order backlog and alleviate the dry order inflow spell it has witnessed in 9MFY18.
Given the upcoming strong pipeline of projects for awarding in the near to medium term in the southern region, we remain upbeat on the KNRC’s medium-term business prospects. Buy.

Southern region provides exciting prospects in upcoming NHAI award finalization
Our recent analysis of the upcoming NHAI pipeline indicates projects worth INR1.4t (7,768km) to be awarded over the next two months. Of these, projects worth INR427b (1,970km) would be based in the South. The southern region – 30% of the NHAI’s overall awarding pie in value terms and 27% in km terms over the next two months – provides exciting opportunities. Even from a medium-term perspective, MoRTH has lined up projects worth INR1.1t in Karnataka; these are likely to be awarded over the next two years.