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.