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IDBI Capital
KNR Constructions (Accumulate)
Target: ₹344
CMP: ₹316.40
The board of KNR Construction Ltd has recommended one bonus share for every one equity share. Bonus share will be issued by way of capitalisation of securities premium reserve. We see bonus issuance as a neutral for the company business and net asset, but will aid in increasing the stock liquidity in exchanges.
As on H1-FY21, company order book stands at ₹8,600 crore (equals to 4x TTM revenue). KNR Constructions labour availability has reached over 80 per cent and it has guided FY21 turnover to increase by 5-7 per cent y-o-y and EBITDA margin at 17-18 per cent.
KNR Constructions has invested ₹250 crore in HAM projects and plans to invest ₹410 crore until FY23. This will be funded from internal accruals.
The company's balance sheet continues to remain lean with H1FY21 standalone debt at ₹64 crore and debt-to-equity at 0.01x and consolidate debt is at ₹800 crore and Net DER is at 0.42x.
Due to spurt in stock price, our stock rating is revised to ‘Accumulate’ with an unchanged target price (TP) of ₹344. Our TP implied valuation is 17x FY23E EPS. Our SOTP based TP assigns 15x PER to construction business and 1x book value to equity investment in road assets.
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