Motilal Oswal Bullish On 2 Stocks From The Infrastructure Sector For Significant Gains

Two companies from the Infrastructure sector are on the radar of Motilal Oswal positively. The companies are KNR Construction & JK Cement. Both companies are showing commendable growth prospects, as per the management's guidance. Based on its evaluation, the stock broking firm feels that the stock price of the companies can grow up to 31%.

1. Buy shares of KNR Constructions at a target price of Rs 320 (upside potential of 31%)

KNR's revenue grew 16% YoY (42% QoQ) to ~INR11.8b (19% beat) in 4QFY23. While EBITDA stood at INR2.1b (16% beat), EBITDA margin declined 255bp YoY and 77bp QoQ to 18% (est. 18.6%).

Driven by robust execution, adjusted PAT increased by 14% YoY to INR1.3b (20% beat). The company secured new orders worth ~INR20b in 4QFY23, taking its total order book to ~INR89b.

Motilal Oswal stated that the company's order pipeline is decent, and it is expecting INR40-50b in new project wins in FY24. The robust tender pipeline in the Road sector is expected to generate order inflows worth INR40-50b in FY24, which should support growth in FY25 and beyond.

View:

Taking into account KNR's existing order book value of INR89b, we expect an 11% CAGR in revenue over FY23-25. EBITDA margin is expected to be around 18-20%. Given this positive outlook, we reiterate our BUY rating with a target price of INR320 (SoTP-based valuation).

Stock price:

The stock price closed at Rs 247.05, up by 1.37% on an intraday basis. The 52-week low is at Rs 202.85 and the 52-week high is at Rs 280.50.

2. Buy shares of JK Cement at a target price of Rs 3,675 (upside potential of 16%)

JK Cement's 4QFY23 operating performance was in line with Motilal Oswal's estimates as higher-than-estimated realization offset higher costs. Consolidated EBITDA came in at INR3.5b (est. INR3.4b), while EBITDA/t stood at INR748 (est. INR753). Adjusted PAT came in at INR1.2b (est. INR1.4b).

Even the 4QFY23 operating performance was in line with the broking firm's estimates as higher-than-estimated realization/t offset higher costs. Consolidated EBITDA came in at INR3.5b (est. INR3.4b), while EBITDA/t stood at INR748 (est. INR753). Adj. PAT came in at INR1.2b (est. INR1.4b).

View:

As the cement company is set to increase its grey cement capacity to ~25mtpa by FY25, the stock broking firm believes, that will boost the company's future earnings. "We believe profitability should improve, driven by cost efficiency measures. We maintain our FY24/FY25 estimates. We prefer the company for its consistent expansion plans. We maintain BUY with a revised TP of INR3,675, valued at 14x FY25E EV/EBITDA (v/s Sep'24E EV/EBITDA earlier)."

Stock price:

The stock price closed at Rs 3,207.75, marginally up 0.97% on an intraday basis. The 52-week low is at Rs 2,005 and the 52-week high is at Rs 3,288.90.

Disclaimer
The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the author, or the brokerage house will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.