Q4FY23 Review: G R Infraprojects: Diversifying to boost revenue growth

22 May 2023 , 01:53 PM

Buoyed by order wins of ~Rs147bn in FY23, GR Infra mgmt guided to double-digit revenue growth going ahead. This includes contribution from expected EPC project wins from Roads and Non-road sectors in FY24. However, margins would trend down amid elevated competition. Balance sheet with ND/E of 0.2x is well placed to support the commitment into portfolio of 32 HAM projects and should benefit from planned listing of road HAM InvIT. Analysts of IIFL Capital Services cut FY24-25 EPS by 9-12% on lower margin assumption. Retain BUY with TP of Rs1,300.

Targeting double-digit revenue growth with larger order book: 

Aided by order wins of ~Rs147bn in FY23 (LOA awaited for Rs60bn), GR Infra’s order book expanded to Rs256bn as at end of FY23. Of this, order book under execution stood at ~Rs120bn with management expecting to receive appointed date for majority of road HAM and 2 ropeway HAM projects in the next 5-6 months. It is also targeting fresh inflow of Rs200bn in FY24, including Rs70-80bn of EPC projects (Roads, Railways, Tunnels), which can see quick start of work. Both of these should drive double-digit revenue growth for FY24, per mgmt.

Margins to trend down amid elevated competition: 

While management expects competitive intensity to taper down with higher govt focus on execution, it still expects ~15% margin for HAM and 12-13% for road EPC projects. Ebitda margin for new segments including Ropeways, Tunnels and Railways should ideally be healthy aided also by focus on larger size projects in these segments. Overall, analysts of IIFL Capital Services see standalone margin trajectory to head lower vs ~16% reported in last 2 years.