Q3FY21 Company Update - KNR Construction - ICICI Direct

Infrastructure was one of the key areas of focus in Union Budget 2021-22. Within the same, road remained in a sweet spot with capital allocation for MORTH pegged at Rs. 1,08,230 crore, up ~18% YoY, the highest ever for the ministry. Most importantly, we are also enthused by the clear intent on monetisation of road assets by NHAI, which we believe could drive an overall expansion in opportunities in the EPC space, given the ease in financing for NHAI. KNR is likely to remain a key beneficiary of thriving road segment.

Valuation & Outlook

Given the strong focus on roads as a segment by the government, we expect the opportunity pie to expand. Thus, we now raise the execution run rate. This is expected to result in an increase in earnings estimates for FY22E, FY23E by ~8%, ~16%, respectively. Considering strong execution, best in class WC, monetisation of BOT/HAM assets, healthy balance sheet, strong return ratios, KNR remains one of our preferred picks. KNR Construction's share price has gone ex-bonus today. The Board of Directors of KNR Constructions has recommended issue of bonus shares in the ratio of 1:1. We adjusted for the same. We maintain BUY rating on the stock with a revised SoTP TP of Rs. 260 (vs. earlier adjusted TP of Rs. 188 (Rs. 375, pre bonus)). We value its core EPC business at Rs. 250/share (10x FY23E EV/EBITDA) vs. earlier target multiple of 7.5x, given the capex cycle recovery expectations.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_KNRCons_CoUpdate_Feb21.pdf

Shares of KNR CONSTRUCTIONS LTD. was last trading in BSE at Rs.218.25 as compared to the previous close of Rs. 446.05. The total number of shares traded during the day was 229376 in over 4473 trades.

The stock hit an intraday high of Rs. 242.1 and intraday low of 211. The net turnover during the day was Rs. 51476521.

Source : Equity Bulls

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