Construction Stock's Orderbook Reaches Rs. 80b, Revenue Up 12%, Share Can Potentially Grow 30% In Short-term

Top brokerage firm Motilal Oswal has given a buy rating to the stock of KNR Constructions. With an order book of Rs. 80b, the brokerage firm expects KNRC to clock 14% revenue growth over FY22-24, with EBITDA margin in the 18-19% range.

Stock To Buy: Target Price

The Current Market Price (CMP) of KNR Construct is around Rs. 239. Motilal Oswal has estimated a Target Price for the stock at Rs. 310. This stock has the potential to give a 30% return, in the upcoming 12 months. This mid-cap stock has a market capitalization of Rs. 6,908 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 239
Target Price	Rs. 310
Potential Upside	30.00%
52-week high share price	Rs. 329.85
52-week low share price	Rs. 202.70

Quarterly earnings

KNRC's revenue grew 12% YoY to Rs. 8.5b during 2QFY23, down 5% QoQ. The revenue included Rs. 72m of bonus received for early project completion. Further, two JVs sold their arbitration claims via assignment deeds and Rs. 245m has been included in revenue due to this. Adjusted for bonus and claims, revenue stood at Rs. 8.15b. EBITDA margin improved 10bp YoY/380bp QoQ to 22.3%. Adjusted for the bonus and arbitration claims, EBITDA margin stood at 19.3% against our estimate of 18.8%. EBITDA/PAT (adjusted for bonus and claims) stood at Rs. 1.6b/Rs. 840M, respectively.

Stock Valuation

Giving a buy rating, Motilal Oswal stated, "The company's execution has been strong in 2QFY23 and is likely to further pick-up in the coming months as monsoon impact settles down. The order inflows have been weak owing to aggressive bidding at industry level, but are likely to improve considering the strong tender pipeline. We maintain buy with an SoTP-based target price of Rs. 310, implying 30% potential upside."

Order pipeline

The order pipeline is decent, with KNRC expecting Rs. 30-40b of new project wins in FY23. Irrigation projects contributed Rs. 1.25b to the revenue in 2QFY23. The pending receivables from the irrigation projects stand at Rs. 9b currently. KNRC has started to receive Rs. 500m-600m per month from the

authorities and is hopeful of faster realization of pending receivables.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Informatio