KNR Constructions Q4 Results Review - Muted Quarter; Order Inflow Must: Dolat Capital

Dolat Capital Report

KNR Constructions Ltd.’s Q4 FY24 results (post adjustments) came below estimates. Core revenue/core Ebitda/adjusted profit after tax reported +0.3%/-4.1%/+12.1% YoY to Rs 2.1 billion/Rs 1.5 billion/Rs 1.4 billion. Core Ebitda margin reduced by 79 bps YoY to 17.2% primarily due to higher spreading and assortment expenses.

KNR Constructions guided flat revenue growth with an Ebitda margin of 15-16% for FY25E and targets an order inflow of Rs 50-60 billion (Rs 20-30 billion by Q2 FY25).

We expect revenue/APAT CAGR of 1.7%/0.8% over FY24-26E with Ebitda margins of 17.4%/17.3% for FY25E/FY26E.

We decrease FY25E/FY26E EPS estimates by 9.1%/5.0% post factoring lower revenue due to lower order inflow (Rs 16.8 billion versus estimates of Rs 47.8 billion) in FY24 coupled with lower Ebitda margins for FY25E/FY26E; sizable order inflow is a must for growth.

The stock has run up by ~11% since our result update note on Feb, 10 2024. Accordingly, we downgrade to ‘Sell’ rating from Accumulate with a revised SOTP based target price of Rs 268 (14 times FY26E EPS and 1.2 times price/book for hybrid annuity model investment).

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