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GR Infraprojects (GRIL) has reported steady order execution but higher profits in Q3FY23. On a standalone basis, revenue was up 4.4% YoY to Rs19bn, EBITDA was up 8.6% YoY to Rs2.8bn, and EBITDA margin came in at 14.6%. Reported PAT in Q3FY23 was up 31.9% at Rs1.7bn. Orderbook stood at Rs141bn, and the company has maintained its FY23 order inflow guidance of Rs150bn. While it had submitted bids for Rs518bn worth of projects in FY23-TD, it is yet to win any project (results for >Rs140bn worth of projects are pending). GRIL has entered into partnership with IndiGrid for bidding in selected transmission projects (totaling Rs50bn). It has also entered into a framework agreement with IndiGrid for its under construction Rajgarh Transmission project, which IndiGrid will acquire post commissioning. GRIL has incorporated Bharat Highways InvIT and will be initially transferring seven operational HAM projects to it,
which it targets to publicly list by Apr’23. Maintain BUY.

* Steady order execution: On standalone basis, GRIL’s revenue was up 4.4% YoY to Rs19bn. EBITDA was up 8.6% YoY to Rs2.8bn; EBITDA margin came in at 14.6%, up 60bps YoY. Reported PAT in Q3FY23 was up 31.9% at Rs1.7bn. Higher interest incomefrom NHAI for operational HAM projects due to the increase in interest rates resulted in stronger margins at consolidated level.

* Guidance of Rs150bn of order inflow in FY23 maintained: GRIL has maintained its FY23 order inflow guidance of Rs150bn, despite not winning any project in FY23-TD. Since most projects in company’s current orderbook are HAM, management expects 8- 10% revenue growth in FY24, but will give margin guidance once it wins more EPC orders. However, the existing orderbook will have 14-15% margin. Management expects FY23 revenue growth of 5-10% YoY with ~15% EBITDA margin.
* Bidding overview: GRIL has submitted bids for >Rs518bn worth of projects in FY23-TD, of which, results for >Rs140bn worth of bids is pending. In highway segment, company has bid for 48 projects worth Rs420bn. It expects HAM opportunity worth >Rs1trn to come up in Q4FY23. GRIL has also bid for two ropeway projects recently with cumulative project cost of Rs20-25bn, and for Rs50bn worth of railways projects. Further, Rs87bn worth of bids for railway projects and Rs250bn worth of tunnel projects are in the pipeline.
* Partners with IndiGrid for power transmission bids: Currently, transmission bid pipeline is of 7 projects worth Rs100bn. Of this, GRIL has identified Rs50bn worth of transmission TBCB projects, where it will be bid jointly along with IndiGrid under a strategic partnership. GRIL will infuse equity and do the EPC for the project. For balance projects, GRIL will bid on its own. These projects are expected to be awarded by Jun’23.
* Enters into framework agreement with IndiGrid for Rajgarh Transmission project: IndiGrid has entered into a framework agreement with GRIL to acquire 100% stake in Rajgarh Transmission Ltd, which GRIL had won in Mar’22. The ISTS project comprises 400/220kV substation at Rajgarh and 400kV double circuit line in Madhya Pradesh. GRIL will develop and execute the project, while IndiGrid will operate and manage the asset post?acquisition from GRIL after its commissioning.
* Valuations and risks: We maintain our BUY rating and target price of Rs1,621/sh on GRIL, valuing its EPC business at 18x FY24E EPS and its HAM projects at 1x FY24E book. We expect revenue / profit CAGR of 11% / 10% over FY22-FY25E, respectively. EBITDA margin may stabilise at ~15-16%. Key risks: 1) Delay in declaration of appointed dates, 2) delay in commissioning of ongoing projects and, 3) inability to win new projects.

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