Buy GR Infraprojects Ltd For Target Rs.1,430 by Axis Securities
Robust & Diversified Orderbook to Drive Growth
Est. Vs. Actual for Q3FY25: Revenue – MISS; EBITDA Margin – BEAT; PAT – BEAT
Change in Estimates post Q3FY25 (Abs)
FY25E/FY26E: Revenue: -4%/-4%; EBITDA: -4%/-8% PAT: -2%/-8%
Recommendation Rationale
* Robust order book: The company's order book position, including L1 projects, stands at Rs 19,971 Cr, providing revenue visibility for the next 24-36 months. For FY25, the company anticipates an order inflow of Rs 17,000 Cr across all segments, with 40% expected from the road sector and the balance from power, railways, tunnelling, and transmission projects.
* Strong bidding pipeline & segment diversification: The bidding pipeline remains strong at Rs 1.35 Lc Cr, with Rs 1 Lc Cr from highways, Rs 20,000 Cr from transmission, and the balance from road tunnels, metro, railways, and ropeways. In addition to road projects, the company has successfully diversified into other segments such as railways, ropeways, optical fibre, multi-modal logistic parks (MMLPs), and power transmission to reduce its dependence on road projects.
* Dividend from InvIT: In 9MFY25, the company received Rs 170 Cr as dividend and interest income from Bharat Highways InvIT and expects to receive Rs 60 Cr on its units with InvIT in Q4FY25. In FY26, the company expects to receive Rs 200-250 Cr of income, supporting its profitability moving forward
Sector Outlook: Positive
Company Outlook & Guidance: The company expects a 10-12% revenue degrowth in FY25. However, it aims for double-digit growth of 9-12% in FY26, driven by a large executable order book and new order intake. The management also indicated expectations of higher EBITDA margins in the range of 10-12%, supported by increased order inflow as current capacities remain underutilised.
Current Valuation: 12.5x FY26E EPS (Earlier Valuation: 15x FY25E EPS) and HAM & Transmission assets at 1x book value.
Current TP: Rs 1430/Share (Earlier TP: Rs 1,760/share)
Recommendation: We maintain our BUY rating on the company
Financial Performance
GR Infraprojects Ltd. (GRIL) reported Q3FY25 revenue of Rs 1,501 Cr, down 17% YoY, due to slower execution and delays in receiving AD, as most projects are in the initial stage. EBITDA stood at Rs 192 Cr, down 16% YoY, while PAT amounted to Rs 169 Cr, down 22% YoY. EBITDA margins for Q3FY25 were reported at 12.8%, compared to our estimate of 12.5% and 12.6% in Q3FY24
Outlook:
In 9MFY25, NHAI’s awarding activity remained relatively low, impacting the infrastructure sector's momentum. However, a pickup in awarding activity is expected in Mar’25, and the outlook for FY26 appears promising, with a significant increase in project awards. GRIL anticipates strong order intake, supported by a robust bidding pipeline across multiple sectors, particularly in EPC and HAM projects led by NHAI. Beyond roads, GRIL is also exploring opportunities in the railways, ropeways, and transmission and distribution (T&D) sectors, which offer substantial growth potential. These diverse prospects position GRIL to leverage its expertise across various infrastructure domains and capitalise on the sector’s anticipated expansion
Valuation & Recommendation
The stock is currently trading at an implied PE of 14x/10x FY25E/FY26E EPS. We maintain our BUY rating on the stock with a target price of Rs 1,430/share, implying an upside of 18% from the CMP.
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