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Buy KNR Constructions; target of Rs 369: Dolat Capital

September 19
13:25 2019

Dolat Capital’s research report on KNR Constructions

The Indian Road and Highway sector is expected to grow at 36.0% CAGR. The Government encouraged foreign portfolio investors to invest in infrastructure debt funds, introduced credit default swaps for the infrastructure sector to provide a boost to the industry. The EPC segment regained its growth momentum in 2018 due to positive developments in the economy, investments in transport infrastructure, energy and housing projects as stated in ‘Construction in India’ by Global Data. The industry is expected to grow at 5.6% from 2016-20 due to an increase in the demand for commercial spaces and the emergence of new industrial corridors and infrastructure. The upcoming river linking projects in various states will provide enormous opportunities to construction companies and EPC contractors.

Outlook

Though stock has fallen ~5% post our Q1FY20 update note, considering pick up in execution from H2FY20E, healthy return ratios, a well-managed balance sheet, comfortable working capital, low D:E, and quality management, we maintain BUY with a SOTP-based TP to `369.

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