Infrastructure Stock
In a recent study issued on May 31, 2021, leading brokerage firm Motilal Oswal Financial Services recommended that investors purchase KNR Constructions. KCR Constructions has transferred its 49 percent ownership in the KNR Tirumala and KNR Shankarampet HAM projects to Cube Highways and Infrastructure III Pte, according to the brokerage’s report.
The sale of its remaining stake in the above two projects has been approved by NHAI. The deal is expected to finalize in the second quarter of FY23. [ Infrastructure Stock ]
Stock Overview: CMP, Target Price, Return, 52 Week low & High
After closing on June 1, 2022, the KNR Constructions Current Market Price (CMP) is Rs 256.05. It began trading at Rs 257.20. The brokerage has set a target price of Rs 320 for the stock. The stock has a potential gain of 25% based on the target price and the CMP. Rs 215 is the 52-week low, while Rs 343.90 is the 52-week high.
The Highways segment is in focus; Irrigation facing challenges
In FY22, irrigation projects accounted for 30% of revenue. However, pending receivables from irrigation projects in Telangana and Andhra Pradesh (due to a shortage of finances by the state governments) totaled Rs 6.5 billion. In the last two to three months, it hasn’t gotten any money from irrigation projects. Irrigation projects account for 25% of the company’s Rs 90 billion order book in FY22 (vs. 44% in FY21), and there aren’t many high-margin projects in the works. [ Infrastructure Stock ]
4QFY22 snapshot
The brokerage claims that “In 4QFY22, revenue increased by 8% YoY and 32% QoQ to Rs 10.1 billion, which was 7% higher than our forecast. In 4QFY22, the EBITDA margin was a healthy 20.6 percent (up 111bp YoY). EBITDA/PAT increased by 14 percent/46 percent year on year to Rs2.1 billion/Rs1.1 billion (estimated Rs1.8 billion/Rs 1 billion).
In FY22, KNR Constructions has not received any orders. It has a current order book of Rs 90 billion (excluding recently won projects) and a 2.8x order-to-revenue ratio.” [ Infrastructure Stock ]
Motilal Oswal suggests ‘buy’ for a target price of Rs 320
“The speed of execution will continue in FY23, after the receipt of scheduled dates for two projects in January. With a diminishing share of irrigation projects in the OB and high commodity costs, we predict margin pressure.
We reduced our EPS forecast for FY23/FY24 by 13%/12% to account for a downturn in the irrigation industry and a muted outlook on order inflows. [ Infrastructure Stock ]
With an order book of INR90 billion, we expect KNRC to grow revenue at 15% CAGR during FY22-24, with an EBITDA margin of 18-19%. With a revised SoTP-based Target Price of Rs 320 per share, we maintain our Buy recommendation, representing a 23 percent upside “recent, according to the brokerage.
KNR Constructions Limited is a company based in the United Kingdom.
KNR Constructions Limited, founded in 1995, is a multi-domain infrastructure development business with over two decades of expertise, specializing in the building of technically demanding and high-value projects in a variety of sectors. Expressways, National Highways, Flyovers, Bridges and Viaducts, Irrigation Projects, Urban Development – Civic Amenities, and Commercial and Residential Projects are among the company’s infrastructure projects.
Disclaimer
The stock was chosen from Motilal Oswal’s brokerage report. The TeknikalRaman, and the author are not accountable for any damages incurred as a result of decisions based on the article. Before making any financial selections, customers should consult with recognized specialists, according to TeknikalRaman.com
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