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    Buy KNR Constructions, target price Rs 258: Edelweiss

    Synopsis

    The brokerage believes fresh order accretion and working capital management will be catalysts for the stock going ahead.

    buy sellThinkStock Photos
    Edelweiss has given a buy rating to KNR Constructions with a target price of Rs 258. The share price moved up by 10.19 per cent from its previous close of Rs 196.85. The last traded stock price is Rs 216.90.

    KNR Constructions’ Q4 FY20 top line fell 6 per cent year on year to Rs 6.8 billion as Covid-19 played spoilsport. Adjusted PAT plunged 29 per cent year on year due to higher interest cost (up 93 per cent year on year) and lower other income. With KNR winning Rs 20-billion irrigation projects, book-to-bill has improved to 3.5 times. According to the brokerage, labour availability issues are likely to constrain execution in the first half FY21; however, the company expects to make it up in the second half of H2FY21.

    Investment Rationale

    Robust execution capabilities and a lean balance sheet are the key positives for KNR. The brokerage believes fresh order accretion and working capital management will be catalysts for the stock going ahead. The brokerage is revising up FY21/22E earnings 57 per cent/11 per cent owing to higher order wins and better margin. It maintains buy rating with SOTP-based target price of Rs 258 -- Rs 189/share for EPC and Rs 69 BOT (DCF valuation) — while rolling forward the valuation to September 2021E.

    Financials

    For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 730.14 crore, up 20.93 per cent from last quarter sales of Rs 603.75 crore and down -4.60 per cent from last year's same quarter sales of Rs 765.36 crore. The company reported net profit after tax of Rs 74.66 crore in the latest quarter.

    Promoter/FII Holdings

    Promoters held 55.17 per cent stake in the company as of March 31, 2020, while FIIs held 1.92 per cent, DIIs 32.45 per cent and public & others 10.35 per cent.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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