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Awaiting new order inflows

* GRINFRA is sitting on an order book of INR156b (2x FY22 revenue). Though it has not bagged any major orders in FY23, its tender pipeline remains robust. It is targeting order inflows of INR150b in the rest of FY23. A Metro project worth INR5.9b, where it was L1 for some time, was recently annulled by the authorities.

* The Company is diversifying and looking at other segments like Metro and Power T&D. A strong tender pipeline in Roads and other segments can translate into decent order inflows for GRINFRA in coming months, which can provide greater visibility on growth beyond FY24. Execution is expected to remain muted in FY23 as many projects are expected to receive their appointed date by FY23-end.

* Given the current order book and robust tender pipeline, we expect execution to pick up from FY24. We expect GRINFRA to clock 11% revenue growth over FY22-24, with an EBITDA margin of 16-17%. We maintain our Buy rating with a SoTP-based TP of INR1,510. A successful diversification into other segments can open up large growth opportunities for GRINFRA.

Order book decent despite muted inflows; strong tender pipeline provides comfort

* Though it has not bagged any major project in FY23, it is still sitting on an order book of INR156b. Weak awarding at the industry level and aggressive competition at the bidding stage has meant weak order inflows for several large players like GRINFRA.

* Project awarding by authorities like NHAI has been to the tune of 1,500km in FY23 till date (against its target of 6,500km for the fiscal). As major awarding typically happens in the last quarter of the fiscal, the awarding momentum is expected to rise sharply. GRINFRA can win decent projects and enhance its order book. The open tender pipeline of NHAI is robust (over INR500b) and is to be awarded over the next few months.

* Of the INR150b of projects being targeted by GRINFRA, 85-90% of projects are from the Roads segment and the rest from the Power T&D and Metro space.

Segmental diversification at play; focus is on monetizing of existing assets

* GRINFRA has diversified into segments like Metro and Power T&D, which enhances the potential market opportunity.

* In Power T&D, it aims to complete the EPC portion of the project and then monetize the asset.

* It is in advanced stages of monetizing its HAM assets via an investment trust (InvIT). It aims to float the trust by FY23-end, which will enable it to bid for additional projects ahead.

* Over the long term, the management’s focus remains on being asset light and to churn operational assets.

Valuation and view

* The order pipeline should see decent inflows in 4QFY23. GRINFRA’s entry into new segments such as power T&D enhances the potential market opportunity. Execution of its asset monetization strategy via the InvIT route can further boost its growth prospects.

* Given its current order book, we expect GRINFRA to clock 11% revenue growth over FY22-24, with EBITDA margin in the 16-17% range. We retain our Buy rating with a SoTP-based TP of INR1,510

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