KNR Constructions sees investor confidence lifted by fresh contract in Telangana
NEW DELHI : KNR Constructions Ltd's stock saw gains of more than 7% in morning trades on Tuesday. The investor interest was boosted by the company receiving a letter of acceptance (LOA) for ₹313 crore order in Telangana. The LOA from Hyderabad Growth Corridor Ltd (HGCL) is towards widening of existing service roads from Nanakramguda to TSPA and Narsingi to Kollur and BT overlay of bitumen pavement from Gachibowli to Shamshabad of Outer Ring Road, Hyderabad, in Telangana.
The company has a strong order book and sees its revenue visibility strengthen further with the fresh LOA. The company’s order book at the end of June quarter, at about ₹11,700 crore already provided revenue visibility for four years. Further, the company was targeting ₹2,000 crore- ₹3,000 crore worth order inflow with 1-2 HAM (hybrid annuity model) projects for the rest of 9MFY22 as per analysts at HDFC Securities Ltd. It was eyeing incremental irrigation projects from Karnataka and is expected to continue being selectively pursuing new irrigation project bids in Telangana. Analysts at Motilal Oswal Financial Services Ltd (MOFSL) had raised their order inflow assumption from ₹5,000 crore to ₹7,000 crore for FY22.
The company also has been impressing with its quarterly performances. Revenue was up 54% year-on-year and significantly ahead of analyst estimates. Analysts at MOFSL had said that the reported revenue was 23% ahead of their estimates. Ebitda margin at 19.4%, too, had beaten expectations of about 18%. The performance indicated project execution to have gained momentum. This was primarily driven by HAM projects with the average operational efficiency in the range of 95% according to analysts. Unlike the previous year that saw a steep impact of lockdowns, the company was not seeing a major shortfall in workforce, and project execution was progressing well.
Overall, analysts have maintained their positive outlook on KNR with earning estimates being revised upwards. On the back of such a strong order book, MOFSL had expected KNR to post revenue and earnings to grow at CAGR (compound annual growth rate) of 24% and 33% respectively over FY21–24.