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Centrum Broking
KNR Constructions (Buy)
Target: ₹262
CMP: ₹233.90
KNR Constructions has reported strong earnings which beat estimates driven by strong execution. Adjusted PAT grew 43.3 per cent y-o-y to ₹96.30 crore (estimate: ₹77.6 crore) and reported PAT after prior period taxes grew 14.5 per cent y-o-y to ₹77 crore.
Order backlog including new HAM projects is robust at ₹11,400 crore (4.2x TTM revenue) and gives strong growth visibility. Management guidance on FY22 execution and margins was cautious given the disruption caused by Covid second wave and higher commodity prices.
We moderate our FY22 revenue estimate to ₹3,030 crore (₹3,140 crore earlier; as against potential to execute ₹3,250 crore). We factor EBITDA margin to decline to 18 per cent (18.5 per cent earlier; FY21: 19.8 per cent) factoring margin pressure on fixed price EPC contracts from HAM SPVs (25 per cent of Mar-21 OB).
Other road EPC and irrigation contracts have PVC and are likely to be relatively less impacted. Our FY23 estimates remain unchanged.
KNR offers a combination of established track record, 22.8 per cent earnings CAGR over FY21-23, robust balance sheet and cashflows and dependable corporate governance.
We maintain Buy with revised price target of ₹262.
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