Q3 Results Preview: Motilal Oswal Picks Two Stocks From Infra Sector With Buy Call For High Returns

Brokerage firm Motilal Oswal has picked two stocks from the infrastructure sector namely G R Infraprojects and KNR Constructions. The brokerage has assigned a buy on these two stocks for potential gains of up to 22% in 2023. Both the stocks are midcap with market capitalisations below Rs 15,000 Crore.

According to the brokerage, Execution is likely to speed up in 3QFY23 after it was hit by the monsoon in 2Q. Project awarding by agencies such as NHAI has picked up since Sep'22 with 2,757kms of projects being awarded to date (v/s only 800kms of projects awarded until 1HFY23). To achieve the target of 6,500kms in FY23E, project awarding needs to be aggressive in 4QFY23.

G R Infraprojects Limited

Motilal Oswal has assigned a buy on the stock with a target price of Rs 1,510 per share. The brokerage anticipates a 22% return in the share price if the stock is purchased at the current market price. 

The share price of the G R Infraprojects on NSE last traded at Rs 1,218.70 per share, fallen by 1.59% from the previous close. It recorded its 52 week high on 13 Jan' 2022 at Rs 1,978 per share and 52 week low on 23 Jun' 2022 at Rs 1,078.85 per share. 

The stock has given 4.21% positive returns in the last 1 week and fallen 35.88% negative returns in the last 1 year. The share price has fallen 30.24% since its date of listing, 19 July 2021. 

According to the brokerage, Expect ~2% YoY growth in revenue to INR18.5b. Delay in appointed dates to keep execution muted in FY23E. Expect EBITDA at ~INR2.8b, with EBITDA margin of 15%. Expect adjusted PAT to increase ~21% YoY. Commentaries on new project awarding and monetization of assetsthrough the InvIT route are the key monitorables.

KNR Constructions Limited (KNRC)

The brokerage has a target price of Rs 310 with a buy call to the stock. The stock purchased at the current market price is likely to give returns up to 20% considering the estimated target price.  

The stock on NSE last traded at Rs 259.60 per share. Its 52 week low was recorded on 20 Oct' 2022 at Rs 202.70 per share and the 52 week high on 01 Feb' 2022 at Rs 329.85 per share. 

The stock has fallen in the last 1 month, giving 1.29% negative return in 1 week and 3.4% negative returns in 1 month, respectively. However, it gave 16% positive return in the last 3 months. It gave 18.34% negative return in the last 1 year. In the last 3 years, it gave a maximum positive return of 86.59%. In the last 5 years, it gave 63.81% positive returns.

The brokerage has said, "KNRC is our top pick in the sector. We like KNRC owing to its net cash Balance Sheet on account of its: a) already monetized HAM projects, b) strong order book, c) robust execution capabilities, and d) healthy margins profile."

According to the brokerage, Expect revenue of INR8.8b (+15% YoY). The execution is likely to improve post-monsoon. Expect EBITDA at INR1.6b and operating margin to contract 220bp YoY due to high input prices. Expect adjusted PAT at INR994m (+25% YoY). Lower tax outgo to support PAT on a YoY basis. Updates on new order inflows and Irrigation receivables are the key monitorables.

Disclaimer

The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.