Target: ₹1,950
CMP: ₹1,535.85
The MORTH/NHAI has recently undertaken measures aimed at addressing the excessive and aggressive bidding seen in YTDFY22. Reduction in competitive intensity in FY23 is imminent and will benefit stronger players. G R Infraprojects’ (GRIL) strong credentials and balance sheet and access to growth capital makes it well placed to benefit.
Order inflows are fast catching up for GRIL and should only strengthen in FY23. Award opportunities from NHAI are likely to sustain at about 4500km pa for next few years and GRIL’s efforts to diversify into Power T&D, Railways and Metro Rail should help.
GRIL with its robust balance sheet (standalone net worth of ₹4,000 crore, net D/E of 0.2x as on Sept-21), strong execution track record and diversified geographic presence should be able to get its rightful share of order wins in FY23 without having to bid aggressively. GRIL can raise growth capital by monetising investments in completed HAM assets and through fresh equity issuance (₹2,240 crore at CMP) which it is likely to undertake in order to comply with minimum public holding norm of 25 per cent for listed companies (by July-24).
GRIL’s YTD FY22 order inflows stand at about ₹8,200 crore (EPC value) strengthening the estimated Mar-22 order backlog to ₹19,500 crore (2.5x TTM revenue).
We expect 17 per cent/22 per cent revenue/earnings CAGR for GRIL over FY22-24 and build-in 50-100bp reduction in margins from earlier estimates.