Hot Chips - KNR Constructions

BSE Code: 532942
Volume:  16252
CMP: Rs 195

KNR Constructions (KNRC) is a leading construction player with a focus on national and state highway projects. The momemtum in the road segment contracts is expected to pick up in 2HFY11. Besides roads, KNRC is evaluating opportunities in pipeline and contract mining via MoUs with other players. The order book is likely to witness good growth going forward. KNRC has witnessed strong growth in the last five years having delivered an average 13-15 per cent EBIDTA margins and 6-7 per cent net margins. This has been on the back of higher average order drop size, own equipment bank, and ownership in aggregate quarries. Also, its D/E at low levels versus peer group, strong customer advances, and high margins have resulted in strong cash flows. The scrip’s low D/E gives adequate headroom for funding future growth. The stock can be looked at for gain in the medium-term perspective.