Buy KNR Constructions, target price Rs 360: HDFC Securities

HDFC Securities has buy call on KNR Constructions with a target price of Rs 360. The current market price of KNR Constructions Ltd. is Rs 310.2. Time period given by analyst is one year when KNR Constructions Ltd. price can reach defined target.

KNR Constructions Ltd., incorporated in the year 1995, is a Mid Cap company (having a market cap of Rs 8635.31 Crore) operating in Infrastructure sector.

KNR Constructions Ltd. key Products/Revenue Segments include Income From Contracts and Other Operating Revenue for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-12-2021, the company reported a Consolidated Total Income of Rs 863.46 Crore, up 1.20 % from last quarter Total Income of Rs 853.23 Crore and up 13.40 % from last year same quarter Total Income of Rs 761.42 Crore. Company reported net profit after tax of Rs 42.12 Crore in latest quarter.


Investment Rationale
KNR posted a strong Q3FY22 financial performance with revenue/EBITDA/APAT at INR 7.7/1.6/0.9bn, beating estimates by 11/10/4%. The order book (OB), as of Dec-21, stood at INR 100bn (~3.7x FY21 revenue). The order inflow (OI)/revenue guidance for FY22 stands at INR 60/31bn. In the quarter, KNR transferred 49% of its stake in two HAM projects to Cube Highways for INR 2.4bn (1.17x P/BV), with INR 1bn expected by Jun- 22, when the remaining stake is transferred. KNR turned net cash with zero debt and cash and cash equivalents are at INR 4bn, as of Dec-21. The NWC days came down to 40 from 45, as of Sep-21. KNR expects NHAI to open tenders for roads and highway construction in Q1FY23. It maintains BUY with an increased TP of INR 360 (18x Dec-23E EPS, HAM 1x P/BV). It has increased FY22/FY23/FY24 EPS estimates by 0.4/2.1/3.6% on the back of better margins and lower interest costs.

Promoter/FII Holdings
Promoters held 51.48 per cent stake in the company as of 31-Dec-2021, while FIIs owned 4.55 per cent, DIIs 34.06 per cent.