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Muted performance; InvIT – near term trigger!

About the stock: GR Infraprojects (GRIL) is a leading player in the roads and highways sector with an overall order book size of | 14,073 crore.

* The company has delivered 26.6% revenue CAGR during FY16-22, wellcomplemented by 33.6% EBITDA CAGR and 39% PAT CAGR

* Prudent management, lean balance sheet position, healthy return ratios

Q3FY23 Results: GRIL reported a muted performance during Q3FY23.

* Standalone revenue grew merely by 4.4% YoY at | 1,898.8 crore

* EBITDA margin improved to 14.6% (up 60 bps YoY) with margin improvement aided by respite in raw material costs. Effectively, EBITDA at | 277 crore, was up 8.6% YoY

* At the net level, PAT improved 35% YoY to | 174.1, largely aided by higher other income and lower depreciation

What should investors do? GRIL’s share price has de-grown by ~32% since listing (from ~| 1,730 in July 2021 to | 1,182 levels currently).

We maintain our BUY rating on the stock as asset monetisation through InvIT will boost scalability, ahead

Target Price and Valuation: We value GRIL at a target price of | 1,400.

Key triggers for future price performance:

* GRIL is likely to be one of the major recipients of thriving roads, railways and power transmission segments. Healthy order inflows to aid its order book position.

* Strong order book position, receipt of appointed date in most of its projects and execution pick-up to translate into ~10% topline CAGR over FY22-25E ? Current order mix, with built-in raw material price variation clauses in most of its contracts, provides margin sustainability at ~15-16%

* Double-digit return ratios and lean balance sheet position

Alternate Stock Idea: Besides GRIL, we like PSP Projects in the infra space.

* Play on strong execution and lean balance sheet

* BUY with a target price of | 820/share

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