Result Update: KNR Constructions Ltd - BUY - TP Rs.235 - Kotak

KNR Q2FY19 results was ahead of our estimates led by better than estimated execution in old projects and strong margins.

Key Highlights

- Revenue for the quarter grew by 5.8% yoy to Rs 4.1 bn (Vs estimates of Rs 3.5 bn) led by better than estimated execution in its older road and irrigation projects which boost revenue for the quarter.

- EBITDA margin at 20% was ahead of our estimates on account of higher margin in EPC projects and contribution from projects nearing completion.

- KNR has an order book of Rs 56.1 bn (including estimated EPC component of 5 HAM projects). The company has maintained its target to add Rs 20-25 bn of new projects from road space in FY19E.

Outlook and Valuation

- The company management has maintained its revenue guidance for FY19E at over Rs18bn and guided for over Rs 23 bn revenue in FY20E, and guided for EBITDA margins of 14-15% in the longer run.

- We have upgraded our EPS estimates for FY19E based on good execution in Q2FY19 and cut estimates for FY20E factoring in delay in land acquisition related risks. The EPC business (adjusted for Rs 33 per share value of BOT) is available at a PE of 12.9x and 11.7x based on FY19E and FY20E revised EPS of Rs 12.2 and Rs 13.5 per share, respectively. We maintain our Buy rating on the stock with revised SOTP based target price of Rs 235 (Vs Rs 283 earlier).

Shares of KNR CONSTRUCTIONS LTD. was last trading in BSE at Rs.190.1 as compared to the previous close of Rs. 190.05. The total number of shares traded during the day was 2340 in over 121 trades.

The stock hit an intraday high of Rs. 190.1 and intraday low of 188. The net turnover during the day was Rs. 442179.

Source : Equity Bulls

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