KNR Constructions Research Reports

KNR Constructions Research Reports by Dolat Capital, HDFC Sec, Motilal Oswal & Reliance Securities

“The annual report theme encompasses four decades of engineering excellence in the field of infrastructure such as roads, irrigation and water management works. KNR maintains its market position by continuously focusing on engineering excellence, improving and sharpening competencies, adapting latest construction technologies, deployment of sophisticated construction equipment and timely delivery. KNR reported revenue growth of 25.3% YoY in FY18. EBITDA margins expanded 509bps YoY to 20% led by operational efficiencies in addition to lower sub-contracting cost. Reported PAT grew 73% YoY to Rs. 2.7bn, however, after adjusting exceptional gains of Rs. 236mn in FY18 vs. loss of Rs. 109mn (FY17), Adj. PAT grew 47.8%.

5 HAM Wins Lead to Rs. 59.6 bn Orderbook (3.0x TTM Revenue)

KNR received 4 NHAI HAM in Q4FY18 and 1 KSHIP HAM in Q1FY19. However, these are not included in the orderbook as financial closures are yet to complete. In the current scenario where, weak balance sheet-companies are facing difficulties for financial closure, KNR has proved its excellence by receiving term loan sanctions for 3 HAM projects and are in the process of completing financial closure.

Stabilization in BOT Toll Collection

KNR’s toll BOT project Walayar-Vadakkancherry in Kerala has received final 100% CoD on 31-Oct-15 and toll collection during FY18 stood at Rs. 517 mn. Currently, toll collection per day is Rs. 2.3 mn. Another toll BOT project Muzaffarpur-Barauni in Bihar has received final 100% CoD on 24-Aug-17 and toll collection started from 1-Oct-17. Toll collection during FY18 stood at Rs. 453 mn. Currently toll collection per day is Rs. 2.0 mn.

Growth Plans and Focus

Under the KNR growth plan, thrust will be given to highway HAM projects, EPC in highways, irrigation including waterways, flyovers and segmental structural section in metros and bridges. In complex bridges, flyovers and railway connectivity projects, KNR will explore technological-cum-financial JV partners. Focus will be on capacity building in manpower, machinery, materials and finance with the objective of timely delivery with perfection.

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We expect KNR to witness healthy revenue growth over FY18-20E, supported by healthy margins and return ratios coupled with well managed balance sheet, comfortable working capital and low D:E ratio. Hence, we maintain Buy with a SOTP of Rs. 418.”

“KNRC continues to outperform its growth guidance and delivered strong 1QFY19 revenue at Rs 5.6bn which was 18.4% above estimates. EBITDA at Rs 1.1bn was 35.7% above our estimates, with EBITDA margins expanding to 19.7% (+215bps YoY, +42bps QoQ). We estimate sustainable margins to be around 16-17% and have revised our estimates to reflect the same. APAT beat stood at 57.5%.

Order book is Rs 59.5bn with Rs 2bn addition in Arunachal Pradesh project scope. KNRC is focusing on completing financial closure of its 5 HAM projects (EPC value – Rs 39.8bn) that were won in 4QFY18. KNR has announced FC for 3 and 4th HAM FC is expected in Aug-18.

KNR continues to maintain a lean WC capital cycle with NWC days at 30, especially demonstrating strong control on receivables (28days) as compared to 50-75 days for other listed peers. We continue to maintain BUY with and increased SOTP of Rs 392/sh.”