Multibagger stock: Up 2700% in 10 years! Anand Rathi retains buy rating on KNR Constructions; here's why
The multibagger stock is in focus again after the company reported earnings for the first quarter of this financial year (FY24).
- Aug 17, 2023,
- Updated Aug 17, 2023 11:29 AM IST
Shares of KNR Construction have delivered multibagger return to its long-term investors as the stock has zoomed over 2700 per cent in the last 10 years. The multibagger stock is in focus again after the company reported earnings for the first quarter of this financial year (FY24).
The company's net profit stood at Rs 440 crore, up 24 per cent yearly. On a quarterly basis, the profit was up 39 per cent to Rs 127.8 crore. It also declared a dividend of Rs 0.25 per share with a face value of Rs 2 each. Total revenue stood at Rs 981 crore, up 0.06 per cent on a year-on-year basis. The order book stood at Rs 6,265.30 crore as of June 30, 2023 (Road Sector: Rs 4,678.8 crore and Irrigation Sector: Rs 1,586.5 crore).
"Geographically, the order book is well spread out across its strongholds. Andhra Pradesh and Telangana (together) command the lion’s share of 40 per cent (up from 37 per cent the prior quarter). Kerala, with two large hybrid annuity orders, followed by 31 per cent (down from 35 per cent the prior quarter). Karnataka held the third position with 16 per cent (up from 15 per cent) and Tamil Nadu was fourth with 13 per cent (down from 14 per cent)," the management highlighted in the investors' earnings call.
After the Q1 earnings, Anand Rathi has retained its 'Buy' rating on the multibagger stock at a slightly higher 12-month target price of Rs 313, suggesting an upside potential of around 30 per cent. Ordinary assurance is priced in and, with potential on offer, it said.
It said that the lower effectively under-execution order book kept KNR’s Q1 revenue primarily soft, not for any issues with its execution abilities or cash-flow stress. This would imply it needs more contributing orders to deliver better.
"The expected appointment of three recently added orders could provide some respite, but it clearly needs success with identified prospects for growth beyond the foreseeable future. Healthy road-sector prospects, and openness to consider newer segments and regions, thus, are auguries," it added.
Also read: Hot stocks on August 17, 2023: Adani Power, Suzlon Energy, IRFC, Cipla and more
The brokerage also highlighted that the fourth quarter of FY23 had unusually high other operating expenses owing to charges incurred for meaningful certification of works carried out at irrigation orders, and to higher transportation charges. This appears to have nearly normalised in the first quarter of FY24 and is the reason for the q/q decline in other operating expenses.
However, Anand Rathi noted that KNR’s Q1 was devoid of any new orders due to the slow ordering by the National Highways Authority of India (NHAI) and continuing competition. This is its fifth quarter without any order in the last eight quarters. It mentioned that considerable delay in adding orders, slower-than-expected pace of execution and significant rise in irrigation receivables are some of the potential risks going forward.
The brokerage noted that the Rs 690 crore Telangana exposure (Aug’23) is Rs 40 crore more than the May’23 official update. The quarterly rise is primarily on Rs 210 crore Q1 irrigation revenue; hence, the pace of execution appears to be mostly tracking client receipts. It is open to more such opportunities; management spoke of potential in Telangana, Rajasthan and MP, it said.
KNR Constructions on D-Street
The small-cap stock hit its 52-week high of Rs 280.5 on March 6, 2023, and a 52-week low of Rs 202.85 on October 20, 2022. It hit an intraday high of Rs 244.70 in Thursday's trading session. Market cap of the firm rose to Rs 6,867.75 crore.
About KNR Constructions
KNR Constructions is a multi-domain infrastructure project development company providing (EPC) engineering, procurement and construction services across sectors namely roads and highways, irrigation and urban water infrastructure management. The company has projects on hand across various states in India covering Arunachal Pradesh, Bihar, Madhya Pradesh, Andhra Pradesh, Karnataka, Kerala and Tamil Nadu.
Disclaimer: The stocks mentioned in the story are for information purposes only. Investors or market participants should consult their financial advisors before taking any position
Also read: Stuck in IRCTC shares since one year? Here’s what you should do
Also read: Adani Power becomes the fourth Adani Group company in GQG's portfolio.
Shares of KNR Construction have delivered multibagger return to its long-term investors as the stock has zoomed over 2700 per cent in the last 10 years. The multibagger stock is in focus again after the company reported earnings for the first quarter of this financial year (FY24).
The company's net profit stood at Rs 440 crore, up 24 per cent yearly. On a quarterly basis, the profit was up 39 per cent to Rs 127.8 crore. It also declared a dividend of Rs 0.25 per share with a face value of Rs 2 each. Total revenue stood at Rs 981 crore, up 0.06 per cent on a year-on-year basis. The order book stood at Rs 6,265.30 crore as of June 30, 2023 (Road Sector: Rs 4,678.8 crore and Irrigation Sector: Rs 1,586.5 crore).
"Geographically, the order book is well spread out across its strongholds. Andhra Pradesh and Telangana (together) command the lion’s share of 40 per cent (up from 37 per cent the prior quarter). Kerala, with two large hybrid annuity orders, followed by 31 per cent (down from 35 per cent the prior quarter). Karnataka held the third position with 16 per cent (up from 15 per cent) and Tamil Nadu was fourth with 13 per cent (down from 14 per cent)," the management highlighted in the investors' earnings call.
After the Q1 earnings, Anand Rathi has retained its 'Buy' rating on the multibagger stock at a slightly higher 12-month target price of Rs 313, suggesting an upside potential of around 30 per cent. Ordinary assurance is priced in and, with potential on offer, it said.
It said that the lower effectively under-execution order book kept KNR’s Q1 revenue primarily soft, not for any issues with its execution abilities or cash-flow stress. This would imply it needs more contributing orders to deliver better.
"The expected appointment of three recently added orders could provide some respite, but it clearly needs success with identified prospects for growth beyond the foreseeable future. Healthy road-sector prospects, and openness to consider newer segments and regions, thus, are auguries," it added.
Also read: Hot stocks on August 17, 2023: Adani Power, Suzlon Energy, IRFC, Cipla and more
The brokerage also highlighted that the fourth quarter of FY23 had unusually high other operating expenses owing to charges incurred for meaningful certification of works carried out at irrigation orders, and to higher transportation charges. This appears to have nearly normalised in the first quarter of FY24 and is the reason for the q/q decline in other operating expenses.
However, Anand Rathi noted that KNR’s Q1 was devoid of any new orders due to the slow ordering by the National Highways Authority of India (NHAI) and continuing competition. This is its fifth quarter without any order in the last eight quarters. It mentioned that considerable delay in adding orders, slower-than-expected pace of execution and significant rise in irrigation receivables are some of the potential risks going forward.
The brokerage noted that the Rs 690 crore Telangana exposure (Aug’23) is Rs 40 crore more than the May’23 official update. The quarterly rise is primarily on Rs 210 crore Q1 irrigation revenue; hence, the pace of execution appears to be mostly tracking client receipts. It is open to more such opportunities; management spoke of potential in Telangana, Rajasthan and MP, it said.
KNR Constructions on D-Street
The small-cap stock hit its 52-week high of Rs 280.5 on March 6, 2023, and a 52-week low of Rs 202.85 on October 20, 2022. It hit an intraday high of Rs 244.70 in Thursday's trading session. Market cap of the firm rose to Rs 6,867.75 crore.
About KNR Constructions
KNR Constructions is a multi-domain infrastructure project development company providing (EPC) engineering, procurement and construction services across sectors namely roads and highways, irrigation and urban water infrastructure management. The company has projects on hand across various states in India covering Arunachal Pradesh, Bihar, Madhya Pradesh, Andhra Pradesh, Karnataka, Kerala and Tamil Nadu.
Disclaimer: The stocks mentioned in the story are for information purposes only. Investors or market participants should consult their financial advisors before taking any position
Also read: Stuck in IRCTC shares since one year? Here’s what you should do
Also read: Adani Power becomes the fourth Adani Group company in GQG's portfolio.