KNR Constructions Limited Q2 FY24 Earnings Conference Call Insights

Key highlights from KNR Constructions Limited (KNRCON) Q2 FY24 Earnings Concall

• Infrastructure Spending and Plans
  • CRISIL estimates India’s infrastructure spending to double from INR143 lakh crores between 2024-2030 compared to 2017-2023.
  • Target for highway construction in FY24 increased to 13,800 km compared to 10,331 km in FY23.
  • NHAI aims to construct average 4,500 km of new highways annually over next 3 years.
  • Projects to be monetized through InvITs and TOT models to attract private sector participation.
  • Approach enables NHAI to leverage private sector expertise.
• Highways Monetization
  • Government plans to expedite monetization of operational highways in upcoming years.
  • Aims to raise approx. INR 2 trillion funds through this monetization.
  • By unlocking value of existing assets, intends to raise capital for further infra development.
  • Ensures sustained capital flow to infrastructure sector.
• Highway Development Hurdles
  • Target set is to award new highway projects worth over INR 1.5 lakh crores before FY24.
  • However, slowdown observed in awarding activities.
  • Target was set to develop 12,500 km highways in FY24, raises concerns over meeting target.
  • Stakeholders looking for strategies to boost awarding to ensure timely infra development.
• Financial Performance
  • Standalone revenue grew by 11% YoY in Q2FY24 to INR941 crores.
  • revenue grew by 8% YoY in H1FY24 to INR1,871 crores.
  • Growth driven by execution of HAM projects.
  • Consolidated PAT stood at INR143 crores in Q2FY24 versus INR99 crores in Q2FY23.
  • PAT stood at INR276 crores in H1FY24 versus INR189 crores in H1FY23.
  • Higher profitability due to increased execution.
  • Consolidated debt as of Sep’23 was INR734 crores.
  • Debt-to-equity ratio was 0.24x at consolidated level.
• Order Inflow Delay
  • NHAI order inflow getting completely postponed due to delays.
  • Company was targeting over INR 4,000 crore order inflow from NHAI.
  • Postponements due to heavy rains in last few months.
  • Expects improved order finalization from Jan-March before elections.
• New Sector Bidding
  • Bidding in railways, tunnels, mining apart from roads and irrigation.
  • Entered into JVs with partners like NCC, Sakthi Engineering etc.
  • Getting required certificates/qualifications to directly bid for mining.
  • Provides experience to bid for larger mining project of INR12,000 cr.
• Growth and Margin Guidance
  • Revenue guidance of INR 4,000 plus crore likely to be INR 4,100-4,200 crore for FY24.
  • Capex of INR 100-120 crore guided for FY24.
  • Margins expected to decline by 2-3% due to extended rains.
  • Overheads going up and turnover coming down.
  • New orders also have lesser margins than expectations, resulting in some inevitable margin decline.
• Railway Bidding Plans
  • Planning to bid for railway projects worth INR 3,000 crore.
  • Includes tunnels, tracks and other structures work.
  • Bids got extended, now due in November 2022.
  • Entry in railways to diversify from core roads sector.
• Irrigation Project Updates
  • Outstanding order book is INR 1,594 crore in irrigation.
  • Includes INR 850 crore in Palamuru Package IV.
  • Continuing work on package IV for now.
  • Clarity on way forward post state election results.
  • Already ordered pumps etc. worth INR 200 cr.
• HAM Project Equity Needs
  • Total equity requirement was INR 732 crore for 5 existing HAM projects.
  • Already infused INR 456 crore equity in these projects.
  • Pending equity of INR 95 cr in FY24 and INR 180 cr in FY25.
  • For 3 new HAM projects, total equity needed is INR 258 crore and is to be infused over FY25-FY27 period.
• Diversification Plans
  • Looking to diversify into railways, irrigation, mining, tunnels, metros.
  • Any construction related infra projects being evaluated.
  • To reduce dependence on roads sector.
  • Gaining qualifications and experience for newer sectors.
  • Already working with partners for some initial projects.