IGI Logo

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.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer