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Subdued 3QFY22; order inflows awaited

Execution to pick up

GRIL saw subdued execution in 3QFY22 due to delays in receiving appointed dates in its projects. Margin was impacted due to certain one-time expenses incurred and rise in input costs. The order book stood at INR146b (excluding L1), with an order book/revenue ratio of ~1.8x.

The order pipeline is strong, with GRIL expecting INR100b of new project wins in 4QFY22. It recently received appointed dates for four projects, which will support execution in FY23 and FY24

We lower our FY23E/FY24E revenue estimate by 11%/10%, EBITDA estimate by 18%/13% and earnings estimate by 22%/15% to factor in a delay in the receipt of appointed dates in HAM projects and weak order flows. With an order book of INR146b, excluding L1, we expect GRIL to clock 12% revenue growth over FY21-24E, with EBITDA margin in the 16-17% range. We retain our Buy rating with a revised TP of INR2,120/share based on SoTP valuation

Execution hit by delays in the receipt of appointed dates

3QFY22 snapshot: Revenue declined by 18% YoY (+7% QoQ) to INR18.2b. This was due to delays in receipt of appointed dates in HAM projects.

EBITDA margin fell 812bp YoY to 14%. EBITDA fell 48% YoY to INR2.5b.

Adjusted PAT fell 59% YoY to INR1.3b.

GRIL has been declared L1 in one Metro project (Noida Metro) worth INR5.9b in 3QFY22. Its current order book stands ~INR146b (excluding L1 orders of INR11.8b)

Key takeaways from the management commentary

The company has recently received appointed dates for four HAM projects, which will support execution in FY23 and FY24.

Massive aggression prevails in the Road EPC space, and hence GRIL has not seen major order inflows. The bid pipeline is strong, and the management expects INR100b of new order flows in 4QFY22.

It expects revenue to grow by 5%/10% in FY22/FY23, with margin at 16-18%

We lower our FY23E/FY24E revenue estimate by 11%/10%, EBITDA estimate by 18%/13% and earnings estimate by 22%/15% to factor in a delay in the receipt of appointed dates in HAM projects and weak order flows. With an order book of INR146b, excluding L1, we expect GRIL to clock 12% revenue growth over FY21-24E, with EBITDA margin in the 16-17% range. We retain our Buy rating with a revised TP of INR2,120/share based on SoTP valuation.

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