Buy G R Infraprojects Ltd for the Target Rs.1,500 by Motilal Oswal Financial Services Ltd
Margin beat led by better execution
Order pipeline remains strong
* GR Infraprojects (GRINFRA) reported a ~4% YoY decline in revenue to INR18.3b in 1QFY26, marginally above our expectations, driven by execution ramp-up in new projects.
* Despite revenue decline, EBITDA margin was healthy at 12.7% (est. 11.8%), aided by operational efficiency. EBITDA fell 6% YoY to INR2.3b, but was ~14% ahead of estimate.
* Higher operating margins, lower depreciation and lower interest resulted in APAT growth of 14% YoY to ~INR2.2b (24% above our estimate).
* The order book currently stands at ~INR194b (excl. L1), with road projects accounting for 69% of the order book. Management expects revenue growth of 10-15% in FY26 with a margin of ~13-14%. GRINFRA expects order inflows of INR200b in FY26 as it diversifies into other infrastructure sectors, along with a pickup in awarding activity, especially in large-sized projects.
* GRINFRA delivered a steady performance in 1QFY26 despite a revenue dip, supported by improved execution, healthy margins, and cost efficiency. The company’s profitability was aided by lower interest and depreciation expenses. Its order book remains strong, anchored by road projects and supported by growing traction in new segments like railways, power transmission, and tunneling. We largely maintain our EPS estimates for FY26/FY27. We expect GRINFRA to clock a 12% revenue CAGR over FY25- 27, with an EBITDA margin in the range of 12-14%. Reiterate BUY with a revised SoTP-based TP of INR1,500.
Robust order book, sector diversification, and strong financial discipline
* GRINFRA’s order book stood at ~INR194b (ex-L1) and ~INR237b (incl. L1). The road segment continues to dominate (69% of order book), but the company is steadily diversifying into railways, metro, power transmission, hydro, tunneling, and telecom. The bid pipeline remains strong with INR73b worth of tenders yet to open.
* GRINFRA targets order inflows of INR200-220b in FY26, led by an uptick in awarding from NHAI (INR3.4t pipeline), and is optimistic about FY27 inflows (~INR300b).
* The company repaid INR1.37b debt during the quarter, reducing its standalone debt-to-equity ratio to 0.04x—among the lowest in the sector. Working capital cycle stretched modestly to 121 days (117 days in FY25) due to higher inventory in power and roads.
Key takeaways from the management commentary
* Management expects revenue growth of 10-15% in FY26 with margins in the 13- 14% range. The company’s strategy of diversifying beyond highways into BoT/HAM, tunneling, optical fiber cable (OFC) and power sectors is gaining traction. Margins in new segments (e.g., OFC) are guided at ~10-13%.
* Promoter equity commitment stands at INR27b, with INR7-8b to be infused in FY26 and INR10b each in FY27 and FY28. Total equity invested in FY26 so far is ~INR3b.
* FY26 order inflow guidance is INR220b, of which INR140-150b will come from transport (highways, railways, metro); INR25-30b from hydro and tunneling; INR40-45b from power transmission and roadways; and ~INR5b from telecom and other segments. FY27 order inflow guidance is ~INR300b, contingent on bid pipeline materialization.
Valuation and view
* While execution of fresh orders may only reflect meaningfully from FY27-28, the company’s strong order inflow guidance, improving bid environment (less competition, tighter prequalification norms), and balance sheet strength provide visibility for sustainable growth.
* We expect GRINFRA to clock a 12% revenue CAGR over FY25-27, with an EBITDA margin in the range of 12-14%. Reiterate BUY with a revised SoTP-based TP of INR1,500.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
