YES Securities is bullish on KNR Construction has recommended sell rating on the stock with a target price of Rs 304 in its research report dated August 19, 2020.
YES Securities' research report on KNR Construction
KNR Constructions reported topline growth of 3.2% yoy (to Rs.4.8bn), well ahead of street and our expectations. Despite Covid-19 impacting operations, the execution stands out as compared to some of the other EPC Companies which have reported significant de-growth. Operating margin remained at an elevated level of 19.7% (up 30bps yoy). PAT declined 16.6% yoy to Rs.398mn largely due to lower other income and higher tax outgo. At the end of Jun’20, KNR’s order book stood heathy at ~Rs.72bn (excluding 1 HAM projects estimated to have EPC value of Rs.6.4 bn), Additionally, the management is targeting ~Rs.20bn of inflows during FY21 (mainly from road segment). The appointed dates (AD) in 4 HAM projects are in-place and are under-execution. In the 5th HAM project namely KNR Palani, the company has submitted financial closure document to NHAI on 22nd May’20 and expects to achieve AD by 31st Aug’20.
Outlook
KNRC expects execution to commence in the recently won irrigation projects over next two-three months. The entire order book (current) is expected to come under execution during H2 FY21. With faster-than-expected ramp-up in operations and entire order book (current) coming under execution during H2 FY21, we have marginally increased our revenue estimates for FY21/FY22. Continued focus on asset monetization and comfortable balance sheet position provide comfort. We maintain our BUY rating on the stock for revised target of Rs.304 (Based on SOTP valuation).
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