Buy G R Infraprojects Ltd For Target Rs. 1,530 - Yes Securities
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Disappointing quarter
Our view
G R Infraprojects Ltd (GRINFRA) delivered a subdued performance, missing revenue/EBITDA estimates by 10/5%. Execution was affected by monsoon and commodity price volatility impacted margins. GRINFRA awaits AD for six HAM assets, which is likely to be received by Q4FY23E. Revenue contribution from these assets will be substantial from FY24E onwards. For FY23E, the company has retained its guidance of revenue growth of 5?10%, with EBITDA margin of 15?16%. The company has received SEBI approval to incorporate an Invit in which the company plans to transfer 7 operational HAM assets by Q4FY23E.
We estimate 11%/12% revenue/PAT CAGR over FY22?25E, led by robust bid pipeline. We have introduced our FY25 estimates with revenue / PAT growth of 12%20% YoY. Cash generation has historically been strong and should continue to support GRINFRA’s capital commitments. We have reduced the multiple from 18x to 15x owing to recent development of NHAI debarment for a period of 1month. We maintain our BUY rating with revised TP of Rs1,165 (earlier Rs1,805) valuating EPC business at 15x FY24E core EPS and value equity invested in HAMs at 1x.
Result Highlights
* For Q2FY23, GR Infra’s net revenues grew 4.6% YoY to Rs17.8bn (below YSec estimate of Rs19.6bn) as execution witnessed slowdown owing to monsoon.
* EBITDA came in at ~Rs2.6bn de?growth of 6.5% YoY (inline YSec estimates of Rs2.7bn) while blended EBITDA margins contracted 172bps to 14.6% (YSec estimate of 14%). The margins were impacted on account of higher raw material cost.
* On bottom?line front, Adj PAT came in at Rs1.6bn (our estimate of Rs1.4bn) largely attributed to higher other income and lower depreciation cost
* During Q2, the company has won arbitration award worth Rs576.2mn with respect to widening and strengthening of existing two?lane carriageway to four lanes of Harike?Zira?Faridkot section in the state of Punjab.
* At the CMP, the stock trades at a P/E of 15.9x and 12.8x of FY23E and FY24E.
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