Road Construction players - Who will win the race along the upcoming freeways?

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G R Infra: Q1 Concall

Current order book:
Rs. 7000 Cr.: Waiting for AD. Of this, ~Rs. 5500 cr should be received by Q3 current year. Balance should be available in Q4.
Rs. 8500 Cr.: Under execution. Will be available for booking in next year
Rs. 4000 Cr.: They were L1 bidder for MSRTC EPC project. Yet to receive the tender.

Total bid in pipeline is of Rs. 2.6 lac cr (~200 projects). Company has submitted 16 bids for Rs. 15318 Cr.

For FY25, they are targetting new orders of Rs. 20000 cr. Out of this, they have already received Rs. 4000 cr (mentioned above). Out of Rs. 20000 Cr, non-road would be Rs. 5000 - 7000 cr.

For project under execution, pending equity contribution is Rs. 2000 cr, of this Rs. 600 cr will be done in current year.

Guidance:
FY25: Flatting growth. FY24 topline was Rs. 9000 cr. In FY25, for Q1 topline was Rs. 2000 cr. For balance 3 quarters, it will be Rs. 7000 cr as mentioned above. If they get any EPC contract sooner, they might book some revenue in current year. Margin too will be flattish i.e. ~12-13%.
FY26: Looking for 15-20% growth if we get more EPC projects. otherwise 10% growth if more of HAM / BOT projects. (Subject to receiving Rs. 20000 Cr orders in current year)

InvIT will contribute ~Rs. 60 cr every quarter (dividend & interest income).

Road projects EBIDTA margin is ~12-13%. Transmission is the new sector. They want their presence felt. Hence initially margin can be low. But will maintain 12-13% once the vertical is established. Similar margin for ropeways and tunnelling projects.

Divestment:
Have signed to transfer 1 project (Aligarh - Kanpur) to InvIT during current year. 1 more asset might get transferred if they receive all the clearances on time. 3-4 assets will be transferred next year.

Company has not growth over last 3 yrs. For FY25 and FY26 too, not much growth is anticipated. They are trying to venture into adjacent sectors but only time will tell if they can deliver. This could be the reason why they are getting lower valuation multiple. (1 more reason is poor EBIDTA to Cash Flow conversion).

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KNR Constructions

  • From a geographical perspective, the orderbook has been entirely based out of Southern India - concentrated towards Telangana (34.5%), Karnataka (28.9%), Andhra Pradesh (15.5%) and Kerala (13.9%).

Q2FY24

  • Elections issue with many EPC players in H1

  • Order book @ 4406 Crores

  • 52% EPC, 23% irrigation, 25% pipeline

  • Within road projects other than HAM, 54% is contributed by state governments, 11% by the central government, and the remaining 2% by other entities.

  • Order book : 4406 Cr, doesn’t include 2 projects worth 1200Cr, H2 might be have better inflow : 6000-8000 Cr

  • Pipeline is good, 80-85 tenders from NHAI (800-1600 Cr)

  • Plans to bid MSRDC project in Maharashtra worth 2000Cr in partnership with other contractors.

  • The road sector is experiencing increasing momentum, with NHAI planning to award projects worth Rs 3 Lc Cr. Additionally, the Andhra Pradesh government aims to award irrigation projects worth Rs 1.5 Lc Cr, presenting significant opportunities for companies like KNR . The company’s strategy to diversify into other segments is a positive move for long-term growth.

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Sale of subsidiaries for 2324 cr. If it is used to pay debt which stands at 5542cr. as per screener. We can expect very good improvement in bottom line.

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D: Invested

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Anyone following KNR construction ? Company has uploaded some information regarding sale of several SPVs. Transaction is expected to be profitable. Would request subject experts/ interested parties to share their views.