KNR Construction Q2 Results Review - Muted Quarter; Order Inflow Must: Dolat Capital

Dolat Capital Report

KNR Construction Ltd. posted results above estimates, however Ebitda margin was in line.

The company reported +11.1%/ -11.9%/ +0.1% YoY in revenue/ Ebitda/ adjusted profit after tax to Rs 9.4 billion/ Rs 1.7 billion/ Rs 1 billion in Q2 FY24. KNR Constructions' reported Ebitda margin/ core Ebitda margin down by 462 basis points/ 211 bps YoY to 17.7% primarily due to higher spreading and assortment expenses, material cost and other expenses, which was partially offset by lower sub-contract cost and employee cost.

We expect revenue/ adjusted profit after tax compound annual growth rate of 6.8%/ 4% over FY23-26E, with Ebitda margin of 18.7%/ 18.2%/ 17.5% for FY24E/ FY25E/ FY26E.

We increase EPS by 7.6% for FY24E factoring higher Ebitda margin and lower depreciation. However, maintain EPS for FY25E.

We introduce FY26E. Current market price leaves limited upside. Thus, we maintain 'Accumulate' with a SOTP based revised target price of Rs 291 (14 times FY26E EPS and 1.2 times price/book for hybrid annuity model investment).

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