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Published on 11/08/2022 5:53:12 PM | Source: Motilal Oswal Financial Services

Buy G R Infraprojects Ltd For Target Rs. 1,630 - Motilal Oswal

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Robust execution despite a seasonally weak quarter

Execution to improve further going ahead

* GRIL reported improved execution in 1QFY23 resulting in 16% YoY/9% QoQ revenue growth (24% above our estimate). EBITDA margin expanded to 19.6% (+345bp YoY), supported by early completion bonus of INR1.3b received during the quarter. EBITDA/PAT grew 41%/58% YoY to INR4.8b/ INR3.2b (ahead of our estimates of INR3.2b/INR1.8b), respectively. Net working capital stood at 77 days at end-1QFY23 (v/s 72 days at end-4QFY22). Input costs have been cooling off and their effect will be more visible in 2HFY23.

* The order book stood at INR170b (excluding L1). The order pipeline is strong, with the management expecting INR150b of new project wins in FY23. A majority of the new orders (INR120b) is likely from the Roads and Highways segment with the balance coming from Power and Ropeway

* The company has established an Investment Trust – Bharat Highways InVIT and registered the trust with SEBI. The InVIT will be a publicly-listed entity and operational HAM projects would be transferred to the trust.

* GRIL has delivered strong execution in 1QFY23. Some of the projects are awaiting appointed dates and are likely to start by end of the year

* We have retained our estimates on execution front and marginally raised our earnings estimates to incorporate the improved margin outlook. With the current order book, we expect GRIL to clock 12% revenue growth over FY22-24, with EBITDA margin being in the 16-18% range. We retain our BUY rating with a revised TP of INR1,630 based on an SoTP valuation.

Order pipeline robust, eyes INR150b worth of new orders in FY23E

* GRIL’s bid pipeline is strong, especially in the Road segment, and the management is targeting total order inflows of INR150b in FY23E

* The company continues to focus on Roads and Highways segment and would also look at some projects in Power T&D and Ropeway verticals

* Government is taking measures that would reduce competition in Roads segment and players such as GRIL could significantly benefit from this

Key takeaways from the management commentary

Out of the current order book, INR100b worth of orders are under execution and appointed dates for ~INR70b worth of projects are expected in FY23

* The invested equity into HAM projects stood at INR15.5b and the management expects INR19b of fund infusion during the next three years for HAM projects

* Management expects revenue to grow 5-10% in FY23 with EBITDA margin at 16-17% level. GRIL anticipates incurring a capex of INR3-4b in FY23.

Valuation and view

* We have retained our estimates on execution front and marginally raised our earnings estimates to incorporate the improved margin outlook. With the current order book, we expect GRIL to clock 12% revenue growth over FY22-24, with EBITDA margin being in the 16-18% range. We retain our BUY rating with a revised TP of INR1,630 based on an SoTP valuation.

 

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