KNR Constructions stock soars 28% in 3 weeks, nears record high; here's why

The brokerage firm MOFSL said the tender pipeline remains robust with strong order flows expected post elections.

Shares of KNR Constructions hit a fresh 52-week high at Rs 315, up 4 per cent on the BSE in Friday’s intra-day trade. The stock has surged 13 per cent in the past two days on a robust order book. In the past three weeks, the stock of the engineering, procurement and construction (EPC) services company has soared 28 per cent. It was trading close to its record high of Rs 343.55 hit on September 1, 2021.

At 01:26 pm; KNR was trading 3.6 per cent higher at Rs 313.35, as compared to 0.28 per cent rise in the S&P BSE Sensex. The average trading volumes on the counter nearly doubled, with a combined 7 million equity shares changing hands on the NSE and BSE.

KNR’s major projects in roads & highways are one of the fast-growing sectors. The company established presence in irrigation and urban water infrastructure management. The company said it would aim to add more business verticals to the organisation in the fields of construction of elevated metro rail and railway projects.

As on March 31, 2024, KNR’s order book position of Rs 5,304.8 crore, of which Rs 3,198 crore from road sector and Rs 2,106.8 crore from irrigation and pipeline sector.

Order book (including new orders stood at Rs 6,505 crore, 1.6x book to bill. Key recent concern for KNR has been lower order inflows and the company has indicated its intent to diversify order book both geographically (outside south) and segment wise (now looking to enter Railways and metro segment), ICICI Securities said in a note.

The company enjoys strong features such as execution record (almost every year has seen bonus receipts), superior margins, best in class working capital cycle (net working capital of 61 days), already achieved monetization of BOT/HAM assets, debt free standalone balance sheet and strong return ratios, the brokerage firm said.

Given a robust order pipeline and a strategic focus on expanding into new segments and markets, KNR aims to significantly enhance its order book. Additionally, considering the slow pace of awarding contracts by National Highways Authority of India (NHAI), the company is exploring partnerships for BOT projects and diversification into non-road segments, Motilal Oswal Financial Services (MOFSL) said in its result update.

The tender pipeline remains robust with strong order flows expected post elections. The company is venturing into non-road segments such as metro and water projects to increase its addressable market. Execution is expected to flattish in FY25 with strong growth in FY26, the brokerage firm. It expects 11 per cent CAGR in revenue over FY24-26. EBITDA margin is expected to be 17-18 per cent. MOFSL said it largely maintained its estimates for FY26 and reiterated its BUY rating on the stock with a target price of Rs 350 (based on SoTP valuation).