IGI Logo

Operating performance marginally below estimates

* G R Infraprojects (GRINFRA)’s revenue was down 12% YoY to ~INR18.9b in 1QFY25 (in line). EBITDA margin was 13% (-160bp YoY) vs. our estimate of 13.7%. EBITDA dipped 22% YoY to INR2.5b, and was 8% above our estimate.

* Higher other income offset the weak operating performance as APAT dipped 3% YoY to ~INR2b, (9% above our estimates).

* As of Jun’24, net working capital days rose to 122 from 112 days in Mar’24, primarily due to SPV debtors. The debt-to-equity ratio improved to 0.12x as of Jun’24 vs. 0.13x as of Mar’24. During 1QFY25, Bharat Highways InVIT claimed a sum of INR494m for the loss incurred to one of its subsidiaries, and GRINFRA had to compensate for such a loss, which was recorded as an exceptional item in the standalone financial results.

* The order book currently stands at ~INR191b (incl. L1), with road projects accounting for 77% of the order book. GRINFRA expects muted revenue growth in FY25 as some projects are likely to receive appointed dates in the coming quarters, and a meaningful revenue contribution from those projects would be seen in FY26. It expects FY26 revenue growth of 10-20%.

* Performance in 1QFY25 has been marginally below our estimates. Revenue growth and margins are expected to be muted in FY25 and improve materially from FY26 onwards. The company is targeting an order inflow of INR200b during FY25. Given the current order book and robust tender pipeline, we expect GRINFRA to clock a 9% revenue CAGR over FY24-26, with an EBITDA margin in the range of 13-15%. Reiterate BUY with a revised TP of INR1,910, based on an SoTP valuation.

Robust order pipeline with a focus on diversification

* The order pipeline is robust with projects worth INR2.6t likely to be tendered in near term. GRINFRA has submitted 16 bids amounting to approximately INR150b, which are expected to be opened soon. It is also working on submitting additional bids as opportunities arise.

* GRINFRA is targeting diversified order inflows, with Roads contributing 70% of the new order inflows and balance from the other segments. The focus continues to be diversification into segments like Railways, Tunneling, T&D, etc.

Key takeaways from the management commentary

* As of Mar’24, the order book was INR191b (incl. L1). Roads and highway projects constituted 77% of the order book. The company currently holds 29 projects across the infrastructure segment. Of the 29 projects, 22 are ongoing, and 7 are awaiting appointed dates (likely by 2QFY25 and 3QFY25).

* Management projects 10-20% revenue growth in FY26, contingent on order inflows in FY25 and timely receipt of appointed dates in FY25. ? Pending equity Investments in HAM projects stand at INR20b. Of this, INR6b is expected to be invested in FY25 and the balance over FY26 and FY27.

Valuation and view

* With minimal order inflows and delays in receipt of appointed dates in projects, revenue growth is expected to be muted and improve only from FY26 onwards. GRINFRA plans to diversify its order book and bid for various projects in other segments.

* Considering a strong order pipeline and diversification of the order book, we largely retain our EPS estimates for FY25/FY26 by and expect GRINFRA to post a revenue CAGR of 9% over FY24-26, with an EBITDA margin in the range of 13- 15%. We reiterate our BUY rating with a revised TP of INR1,910 (based on SoTP valuation).

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412