Superior Execution, Caution in Bidding Give KNR the Edge
Healthy order book, low net debt-equity ratio and better working capital management help this construction company to stand out among peers
some of the company’s projects in the South was impacted due to Chennai floods, environment issues and availability of land. These issues have been largely resolved since the company has secured a large part of land in South. In the coming quarters, project execution is likely to gather pace.
In the year-to-date period, National Highway Authority of India has awarded projects totalling length of 4,700 km. It is expected that the pace of awarding projects may pick up. The government’s budgetary allocation for road projects for FY17 is ₹ 80,000 crore as against ₹ 39,000 crore in FY16.
Analysts point out that KNR is expected to follow its cautious approach in bidding for hybrid projects. KNR is expected to secure a few hybrid annuity projects once aggression in bidding for these projects cools off. The company is also expected to secure a few irrigation projects in the new state of Telangana.
On the valuation front, considering FY18 estimated earnings, the stock is available at a P/E of 10.3 compared with its three year average P/E of 21.