Q4FY23 Review: KNR Constructions: Healthy Q4; focus on diversification

31 May 2023 , 12:08 PM

KNR Construction delivered healthy 14% revenue growth and stable 19.3% Ebitda margin for FY23. While end FY23 order book at Rs88.7bn (2.4x book to bill) has fallen amid cautious bidding, it still provides visibility for 15% revenue growth with stable margins. Company is looking to venture into urban development, railways and metros and into western & central states to sustain project wins at healthy margins.

Revenue growth and margin trajectory sustains in FY23: 

KNR Construction reported 16% YoY growth in Q4 revenue to report FY23 revenue of Rs37.4bn – up 14.4% YoY. Healthy execution of starting order book across both road and irrigation projects supported the momentum. Ebitda margins have sustained at a healthy level of 19.3% for FY23 – similar to the 19-20% range seen since FY18 aided by cautious bidding and contribution from irrigation projects in Telangana where absence of mobilisation advance has kept competition at bay.

Order book has fallen but will still comfortable: 

KNR Construction has been cautious all through last three years amid intense competition for highway projects. As a result, end FY23 order book at Rs88.7bn has fallen. But with book to bill of 2.4x on FY23 revenue, it still provides visibility for ~15% revenue growth over FY24-25. With competition remaining intense, management is looking to diversify geographically into western and central India given the healthy pipeline of projects in metros, railways, state roads and urban development. Irrigation in Telangana remains a focus as well despite upcoming election near the end of calendar 2023.

Best in class balance sheet: 

KNR sustained the net cash standalone balance sheet in FY23 (Rs2bn) and posted consolidated ND/E of 0.2x following monetisation of three HAM assets to Cube Highways. This was despite increase in WC levels due to lower liability on falling order book. Going ahead, KNR would remain a net cash company at SA level despite equity commitment of ~Rs6.4bn over FY24-26. Focus on monetisation of HAM assets continues as well.