KNR Constructions - 1QFY2017 Result Update - Angel Broking

KNR Constructions (KNR) reported strong set of 1QFY2017 numbers. On the top-line (standalone) front, it reported 73.9% yoy increase to Rs. 304cr (ahead of our estimate of Rs. 249cr). 48% of 1QFY2017 revenues were from (1) MaduraiRamanathapuram project (Rs. 68cr), (2) Trivandrum bypass project (Rs. 44cr) and (3) Penchalakona-Yerpedu project (Rs. 35cr). EBITDA and PAT numbers were ahead of our estimate at Rs. 44cr and Rs. 30cr, respectively (v/s our estimate of Rs. 37cr and Rs. 25cr, respectively).

KNR's order book as of now stands at ~Rs. 4,925cr, which gives strong revenue visibility for over the next 3 years.

Valuation: KNR in our view enjoys (1) strong execution track record, (2) better cost structure (reflected in better EBITDA & PAT margins vs some of its peers), (3) shorter working capital cycle, (4) low leverage (since FY2011, D/E ratio has been ~0.2x), and (5) impressive RoEs (12.1-24.9% range during FY2011-16). All these factors indicate KNR's superior earnings quality, and strengthen our view that KNR would continue to trade at premium valuations. On valuing standalone entity at 15.0x to our FY2018E EPS of Rs. 48.5, and adding value for its Kerala & Muzaffarpur BOT projects, we arrive at FY2018E sum-of-the-parts (SoTP) based price target of Rs. 802/share, implying 15% upside from current levels. Given the upside in the stock, we maintain our Buy rating on the stock.

Shares of KNR CONSTRUCTIONS LTD. was last trading in BSE at Rs.715 as compared to the previous close of Rs. 698.85. The total number of shares traded during the day was 9721 in over 808 trades.

The stock hit an intraday high of Rs. 716.3 and intraday low of 690.05. The net turnover during the day was Rs. 6870486.

Source : Equity Bulls

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