Multi Baggers

KNR Constructions

Company Overview:

KNR is a medium sized company in the field of surface transport infrastructure and  specializes in construction of Expressways, National Highways, Rural roads, Flyovers and Commercial/Residential projects on EPC and BOT basis. KNR has around 20 years of experience in project execution and has executed about 5400 lane km road projects spread across 12 states in India. It has completed 670 lane km of BOT (Build-Operate-Transfer) projects in Andhra Pradesh, Karnataka, Kerala which include two completed annuity based projects and one Toll based project under construction. It has got a strong EPC order book of more than Rs.1200 crores as on June 30, 2014.

Financial Analysis:

For the first quarter of FY15, KNR had a total revenue of Rs.236.5 crores which is a 14% increase over the corresponding quarter of the previous year. The profit after tax showed an impressive rise of 78% to Rs.19.8 crores in the same quarter. This was however, to some extent on account of a tax claim of Rs.4.35 crores; even then the results were very good.

For the full FY2013-14, KNR logged a turnover of Rs.835 crores and profit after tax was Rs.60.9 crores which were also impressive in their growth. The full year EPS (Earnings per share) was Rs.21.68.

Positives:

1.Impressive growth in turnover and profits especially in a difficult environment.

2. Strong Balance sheet with low interest cost and low debt of equity (0.13)

3. Strong project implementation skills with capacity to complete projects even ahead of schedule.

Valuations and Recommendation:

At CMP of Rs 219.85 the share trades at a PE of 10.2 based on FY2013-14 EPS and based on annualized FY2014-15 EPS, the PE is low 8.06. Given the strong growth, good order book and high standards of project completion, KNR is one of the one top picks in infrastructure space which is witnessing a turnover around. We recommend this stock with a price target of Rs 450 in 12-18 months.