KNR Constructions - Emerging Corporates : INVESTOR FORUM Key takeaways :: HDFC Securities

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KNR Constructions (KNRC) is a specialised
player in road construction having completed
~5,400 lane kms that comprises over 90% of its
order book. KNRC’s backward integration into
quarries and RMC plants, own equipment and
no subcontracting have led to EBITDA margins
of over 15% in FY09-14. KNRC has a track
record of timely project completion and has
also received bonuses for early completion in
few projects. This is owing to KNRC’s pool of
~700 in-house professionals and selection of
right projects.
 Well placed to ride road sector recovery :
Although balance sheets of most road
contractors and developers are stressed, KNRC is
one of the notable exceptions in the sector with
standalone net debt/equity of just 0.2x. As a
result, KNRC is well placed to benefit from
expected order uptick in EPC road tenders from
the NHAI and Indian State Governments from
H2FY15E.
 Order book to gain traction : KNRC currently has
an order book of Rs 10bn (1.3x FY14 revenues).
With the NHAI recently having announced
tenders worth ~Rs 450bn, KNRC has been
actively participating in bids and has placed bids
for orders worth Rs 70-80bn and maintains its
guidance of Rs 20bn of new order wins in
1HCY15E. The order wins are expected to be a
mix of NHAI and State EPC projects. KNRC is also
exploring options of diversifying into other urban
infrastructure opportunities in metro projects
and railways. However, these plans are purely
long term in nature and the company will only
venture into projects having a decent margin
profile.
 Kerala BOT project on track : The management
retains its guidance on the Kerala BOT project
being completed in 4QFY15E with CoD expected
in Apr-15 (seven months ahead of scheduled CoD
of Nov-15). The company may receive a bonus of
Rs 200-250mn owing to early completion

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