KNR constructions is just a 28 years old company engaged in construction of roads, highways, bridges and flyovers on EPC, BOT and Hybrid Annuity Model (HAM) basis. It also undertakes Irrigation projects, urban water infrastructure management and agriculture projects.

KNR CONSTRUCTION

Current Market price on the date of publishing this report-: 250 Rs

Introduction

Incorporated in 1995, the company works in the infrastructure sector, completing Turnkey EPC contracts and BOT & HAM projects through public-private partnerships. The company’s primary operations include the building of highways, bridges, flyovers, and irrigation projects.

KNRCL is a multidomain infrastructure project development business that offers engineering, procurement, and construction (EPC) services in a variety of fast-growing areas such as roads and highways, irrigation, and urban water infrastructure management. The company’s project execution strength is predominantly in road transportation engineering projects, namely the building and maintenance of roads, highways, flyovers, and bridges wherever they are required by the projects.

With over 25 years of experience in project execution, KNR Constructions has successfully managed and completed over 7,500 lane km Road Projects, spanning across 12 states in India.

KNR Constructions has a diverse portfolio of BOT/HAM projects that demonstrate their skill and adaptability in the area. Among their significant accomplishments are the effective completion of 668 lane km Projects in Telangana, Karnataka, and Bihar. Furthermore, KNR Constructions has completed two Annuity-based projects, one Toll-based project, and five HAM projects, demonstrating its adaptability to various project types. Notably, they have excelled in the HAM arena, having completed five projects with a total Bid Project cost of Rs. 76,135 million. The varied and accomplished portfolio of KNR Constructions displays their dedication to excellence and capacity to create remarkable outcomes in the infrastructure industry.

Business

Highway projects

KNR Construction has successfully executed projects totaling an astonishing 51,120+ crores in the domain of high-value projects. Simultaneously, the company is engaging with numerous clients on active projects valued around 8969 crores.

KNRCL is associating with various other group of companies as JV Partners for successful completion of major EPC contracts.

Irrigation water management

The present value of active irrigation projects with various clients under KNR Construction is 3252 crores. Furthermore, the organisation has executed 75 crore projects, including:

• Reservoir over Mathadivagu in Adilabad district to dispose of 69500 Cusecs water, construction of a head regulator to allow water to flow into the left canal.
• Budpur Balancing Reservoir is building an earthen dam.

The irrigation revenue in Q3 was that is around 23% comes to INR 190 crores. And for 9 month, it is around 25% comes to INR 628 crores.

River bridges

Urban water development

Under this company constructs

• Flyovers
• Sewage works and
• Water works

Clients

Order book

KNRC received new orders of roughly INR 20 billion in 4QFY23, for a total order book value of around INR 89 billion. The business forecasts significant expansion in FY24, with new project wins estimated to range between INR 40-50 billion. Furthermore, the Road sector’s robust procurement pipeline is expected to yield order inflows totaling INR 40-50 billion in FY24, bolstering growth in FY25 and beyond.

It can be estimated a compound annual growth rate (CAGR) of 11% in revenue from FY23 to FY25, based on KNRC’s present order book value of INR 89 billion. The EBITDA margin is predicted to continue between 18 and 20%.

KNR Construction (KNRC) forecasts an order inflow of INR 40 billion to INR 50 billion. The company is aggressively investigating various potential in areas such as urban development projects, metro, trains, and others. Furthermore, KNRC is thinking of bidding in western states, notably Maharashtra.

Bid Pipeline

The following projects are in the bid pipeline:

• Maharashtra’s government has funded 26 projects.
• 4-5 irrigation packages from the Telangana government will begin in June City road projects from states such as Karnataka Bridge works in Pune, Nagpur, and Bihar Metro projects

Debt reduction and capex

KNR Constructions has invested roughly INR 110 crores in capital expenditures as of Q3FY23. The business anticipates a closing amount of INR 140 crores to INR 150 crores for FY ’23. Looking ahead to fiscal year ’24, the company’s capital spending will be determined by the new projects it undertakes, but management anticipates it to stay in the same range as this year.

Financials

For Q4 FY 23

• Net Sales stood at Rs 1,245.33 crore in March 2023 up 13% from Rs. 1,102.09 crore in March 2022.
• Quarterly Net Profit stood at Rs. 147.27 crore in March 2023 up 5.83% from Rs. 139.16 crore in March 2022.
• EBITDA stood at Rs. 256.06 crore in March 2023 down 14.27% from Rs. 298.69 crore in March 2022.

For 9 month FY 23

• Revenue for 9 months FY ’23: INR 2,568.2 crores (14% YoY growth)
• EBITDA for 9 months FY ’23: INR 509.8 crores (9% YoY growth)
• EBITDA margin in 9 months of FY ’23: 19.9%
• Net profit for 9 months FY ’23: INR 370.2 crores (compared to INR 269 crores in 9 months FY ’22)

For the year ended March 23

• Net sale as of March 23: INR 4062 crores (12% YoY growth compared to March 22)
• EBITDA as of March 23: INR 917 crores (14% YoY growth compared to March 22)
• EBT as of March 23: INR 682 crores (21% YoY growth compared to March 22)
• Net profit as of March 23: INR 439 crores (20% YoY growth compared to March 22)
• Consistent OPM (Operating Profit Margin) above 22%
• Consistent ROCE (Return on Capital Employed) above 20%
• Total debt reduced from INR 1464 crores in FY 22 to INR 652 crores in FY 23

Management’s comments

According to the management’s views, bids for national roads from the southern area are likely to total INR 35,000 crores. However, no specifics about the number of bids or the company’s involvement were provided.

The management expects a top line of around INR 4,000 crores in FY ’24. They plan to close the fiscal year with a value of about INR 3,000 crores, especially around INR 3,500 crores. Thus, the management expects a top line of roughly INR 4,000 crores in FY ’24.

Given the forthcoming elections the following year, management aims to finish all current irrigation projects. This proactive strategy is motivated by the understanding that, following the election, the newly elected leadership may have difficulties in appraising future policy changes and the payment system. The management intends to alleviate any concerns and guarantee smooth development in the irrigation projects by prioritising project completion before the elections.

KNR Constructions has strategic objectives to enter the railway construction market, particularly because to the substantial profit margins connected with such projects. The management thinks that by broadening its portfolio to include railway projects, its total profit margins would increase. This strategic decision illustrates the company’s dedication to pursuing new prospects and increasing profitability in the construction business.

Sectorial outlook

In FY2023, the NHAI awarded 6003 km of road projects, which was somewhat less than the objective of 6500 km. The overall value of NHAI-awarded projects fell by 15% year on year to Rs. 1.26 lakh crore. The NHAI’s highway building increased by 13% year on year, reaching 4882 km in FY2023. In FY2023, the road ministry built 8064 km, falling short of the aim of 12,000 km. The total length of road projects awarded in FY2023 was 7497 km, 121 km less than in FY2022. FASTag receipts increased by 46% in fiscal year 2022, totaling Rs. 50,855 crore. The NHAI implemented a 7% toll price increase on April 1, 2023.

The government has planned infrastructure investments of Rs. 111 lakh crore from FY2020 to FY2025. Specifically, the road sector is anticipated to receive investments worth Rs. 20 lakh crore during the same period.

Conclusion

Finally, KNR Constructions is a well-established company with over 28 years of expertise in the building sector. It focuses on road, highway, bridge, and flyover construction, employing a variety of methods such as EPC, BOT, and HAM. In addition, the company has broadened its portfolio by taking on irrigation projects, urban water infrastructure management, and farm projects.

KNR Constructions has shown its experience in project management and delivery by successfully executing and finishing over 7,500 lane km Road Projects throughout 12 states in India. The management’s positive prognosis for FY ’24, with an estimated top line of over INR 4,000 crores and predicted EBITDA margins of 18-20%, enhances the company’s development potential even more.

Furthermore, KNR Constructions typically generates a high return on capital employed (ROCE) of more than 21% and an operating profit margin (OPM) of more than 22%, demonstrating its efficient operational efficiency and profitability.

KNR Constructions presents itself as a fascinating prospect for exploration in the construction company, given its outstanding credentials, diverse project portfolio, and positive financial outlook.

Please keep in mind that investing decisions should be based on extensive study and analysis that takes into account considerations other than the information provided here.