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Recent order inflows allay order book concerns

GRIL has managed to win decent orders (~INR72b) over the last one month. Its order book now stands at INR230b (2.9x FY22E revenue). The recent wins allay concerns of a weak order book

The majority of the new order wins have been driven by HAM projects from NHAI. It has also bagged its first Power Transmission project (TBCB project), where the EPC value will be ~INR5b

Going forward, the management will continue to bid for Road projects, while also bidding for more Power TBCB and Metro projects.

With an order book of INR230b, including L1, we expect GRIL to clock 12% revenue growth over FY21-24, with EBITDA margin in the 16-17% range. We retain our Buy rating with a revised TP of INR1,900/share, based on SoTP valuation. We value the core EPC business at 16x FY24E EPS and the BOT business at 1.2x on invested equity

Roads remain a key focus area for GRIL; diversification into other segments to support order inflows

GRIL is looking at several Infra verticals to keep its order flows elevated and diversify its business profile.

It has also won its first Power Transmission project (TBCB project), where it will look to complete the EPC portion and then look to monetize the project. It has bid for more such projects and this can be a big vertical for the company going forward

While it is winning projects in areas like Power Transmission and Metro, Road would continue to be the key focus area for the company. The Road segment currently constitutes ~90% of the unexecuted order book

Looking at floating an InVIT in the next few quarters; will allow it to bid for more projects going forward

The management is actively looking to offload HAM projects via the InvIT route, which is likely to materialize over the next few quarters.

With InvIT, GRIL expects its competitiveness to improve as the cost of capital can reduce (its credit rating may improve post InvIT).

An InvIT will allow freeing up of capital and the company will be in a position to bid for more projects.

Valuation and view

Recent order inflows have pumped up the order book (which now stands ~INR230b, including L1) and places the company in a comfortable position

The entry into the Power T&D segment, with the recent order win, enhances the potential market opportunity for GRIL.

With an order book of INR230b, including L1, we expect GRIL to witness 12% revenue growth over FY21-24, with EBITDA margin in the 16-17% range. We retain our Buy rating with a TP of INR1,900 per share, based on SoTP valuation.

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