KNR Constructions gains after subsidiary bags road project in Karnataka

Shares of KNR Constructions jumped nearly 1.5 percent in the early trade on June 30 after its subsidiary, KNR Kaveri Infra, entered into an agreement with the National Highways Authority of India for a road project in Karnataka.

KNR Kaveri Infra signed a concession agreement for the four- laning, with paved shoulder, of the Mysore to Kushal Nagara section on hybrid annuity mode, KNR Construction said in an exchange filing on June 29.

At 9.29 am, KNR Construction was trading 0.66 percent higher at Rs 242.50 on the National Stock Exchange.

The contract comes as the road construction sector experienced a slowdown during April and May. The NHAI halted road project awards during this period, resulting in no Letter of Offer Acceptance (LOAs) Nuvama Institutional Equities said in a report.

The situation is expected to have no significant impact on the long-term project pipeline, as March witnessed a significant surge in road awarding.

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In March, 4,878 kilometers of work was awarded, with the NHAI giving contract for 2,627 kilometers. In contrast, road awarding in April and May was minimal, with only around 100 kilometers awarded by the Ministry of Road Transport and Highways.

Despite the temporary slowdown, analysts remain positive on the infrastructure sector. Axis Securities said NHAI plans to award several projects under the Bharatmala Pariyojana, the Centre’s flagship programme aimed at building highways and expressways. It is expected to drive the momentum of road construction. Axis Securities anticipates an increase in awarding activities in FY23, as it is a pre-election year.

Brokerage Views

KNR Construction expects an order inflow worth Rs 4,000-Rs 5000 crore in FY24. Axis Securities expects KNR Construction’s revenue to grow at a CAGR of 13 percent over FY22-25.

“The company is looking to diversify to other segments such as railway, metros, and urban infra to keep the revenue stream unaffected apart from the road segment,” said the broking firm. Axis Securities has maintained a “buy” rating on the stock with a target price of Rs 325.

The stock has lost 8.17 percent of its value over the last six months.

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