Buy KNR Constructions, target price Rs 270: Motilal Oswal

Motilal Oswal has given a buy rating to KNR Constructions with a target price of Rs 270. The share price moved down by -3.32 per cent from its previous close of Rs 201.80. The last traded stock price is Rs 195.10.

Investment Rationale

The brokerage said there were healthy margins despite lower-than-expected revenues. In the Q4 of FY20, revenues were down 6 per cent year on year and 17 per cent below the brokerage estimate at Rs 6.8 billion. EBITDA stood flat year on year at Rs 1.5 billion (9 per cent below estimate); EBITDA margin came in at 21.7 per cent, up 160 bp year on year. Higher interest and depreciation cost coupled with lower other income led to 17 per cent year on year decline in PBT to Rs 859 million. Effective tax rate stood at 21.8 per cent (v/s 8.9 per cent year on year). Adjusted PAT came in at Rs 672 million, down 29 per cent year on year (14 per cent below est.)

For FY20, revenue stood at Rs 22.2 billion, up 5 per cent year on year. EBITDA came in at Rs 4.7 billion, up 14 per cent year on year. EBITDA margins expanded by 120 bp year on year to 20.5 per cent. PBT stood at Rs 2.6 billion, down 4 per cent year on year owing to higher depreciation and interest cost with lower other income. Effective tax rate stood at 22.9 per cent (v/s 9.7 per cent year on year). Adjusted PAT came in at Rs 2 billion, down 18 per cent year on year. Order book stood at Rs 52.3b, implying book to bill of 2.4 times. Cash flow from operations stood at Rs 3.9 billion in FY20 v/s Rs 2.5 billion in FY19.


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.