March 24, 2023
analysis123 analysis123
G R INFRAPROJECTS, Execution in line; revenue guidance cut due to delays in new order inflows
Call & Research Report by Motilal Oswal
Sector: Construction – Infrastructure
CMP Rs. 1215, Target Rs. 1400 (15% upside potential)
Target Period: 12 Months
● G R Infraprojects (GRIL)’s revenue grew 4.4% YoY (+7% QoQ) to ~INR18.9b in 3QFY23 and was in line with our estimate. EBITDA margin was at 14.6% in 3QFY23 (+60bp YoY). EBITDA grew 9% YoY to INR2.8b and was in line with our estimate. Higher other income and low depreciation saw APAT grow 32% YoY to INR1.7b (9% above our estimate). Net working capital stood at 82 days at end-3QFY23 (v/s 85 days at 2Q end).
● Order book at end-3QFY23 stood at INR141b. The order pipeline has been strong (~INR1.1t worth of projects) with GRIL expecting INR150b of new project wins in FY23. The majority of the new orders are likely to come from the Roads segment with the balance coming from Railways and Ropeways. GRIL has bid for projects worth INR500b for which bids are yet to be opened.
● The order inflows have been muted and hence, the company has lowered its revenue guidance for FY24. The projects, which GRIL is expecting to win, would not start contributing materially to its 1HFY24E revenue. Thus, GRIL is now expecting only 10% revenue growth (v/s 15% earlier for FY24).
● We have reduced our FY24E EPS by 6% to factor in slower execution and cautious outlook on margin improvement. With current order book, we now expect GRIL to clock 15% revenue growth over FY23 25, with EBITDA margin in the 15-16% range. We retain our BUY rating with a revised TP of INR1,400 based on an SoTP valuation.
Order pipeline robust, eyes INR150b worth of orders in FY23E
● The bid pipeline is strong, especially in the Roads segment, and GRIL is targeting total order inflows of INR150b in FY23. It currently has bid for projects worth INR500b, where the bids are yet to be opened.
● The company has also bid for projects in Railways and Ropeway segments and expects some orders in those segments too.
Key takeaways from the management commentary
● GRIL lowered its revenue growth guidance to 10% in FY24 (15% earlier) due to delay in new order inflows. It has provided a cautious view on EBITDA margin due to high competition in bidding.
● Management expects ~INR15b of fund infusion during the next two years for HAM projects.
● GRIL’s InVIT would be operational soon and some assets would get transferred.
Valuation and view
● The robust order pipeline should see decent order inflows in 4QFY23. However, in the near-to-medium term, the execution would be hit as the projects starting now would take time to ramp-up.
● We expect GRIL to clock 15% revenue growth over FY23-25E, with EBITDA margin in the 15-16% range. We retain our BUY rating with a revised TP of INR1,400 based on an SoTP valuation.
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