CMP: ₹216
Target: ₹274
KNR’s revenue declined 5.6 per cent y-o-y to ₹680 crore, above estimate of ₹530 crore led by stronger execution in HAM projects. EBITDA margins grew 160 bps y-o-y to 21.7 per cent (est: 18.8 per cent) led by improved revenue mix. While debt reduced marginally y-o-y to ₹230 crore (down ₹110 crore q-o-q), interest expenses grew by 93.1 per cent y-o-y to ₹14.5 crore due to higher average utilisation of debt and mobilisation advances and debt reduction only at end of the quarter. Labour availability is low at 20-30 per cent on majority of sites hampering the pace of execution (ranging 50-65 per cent). KNR expects meaningful recovery in execution in H2FY21.
KNR has won two irrigation orders worth ₹23.1bn in JVs in Q1FY21 (KNR’s share: ₹2,000 crore), improving revenue visibility over FY22. For FY21E, it targets to win ₹3,000 crore inflows from NHAI and is pursuing HAM projects worth ₹6,500-7,000 crore in the South.
Backed by a strong order backlog and improving share of executable orders, we expect KNR’s earnings to recover sharply by 44.6 per cent y-o-y in FY22E. Stock trades at around 10.7x FY22E EPS (not adjusted for value of assets of ₹36/share). We maintain our ‘Buy’ rating on KNR with an SOTP based revised price target of ₹274/ share.
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