Q2FY24 Review: G R Infraprojects: Weak Q2 led by smallish order book

13 Nov 2023 , 02:39 PM

Following Q2/H1 revenue decline of 11/12%, GR Infra mgmt. cut its FY24 revenue guidance to 0-5% growth as currently only Rs110bn of the Rs200bn order book is under execution. Receipt of AD for 11 HAM assets worth Rs90bn in Q4 would be key to FY25 growth of 8%. OI target of Rs100bn is subject of election related disruption and intense competition. Anakysts of IIFL Capital Services cut EPS estimates by 16/11% for FY24/25 led by lower revenue growth and margin expectations. They downgrade to ADD. 

Q2FY24 disappoints with weak execution: 

GR Infra reported Q2 revenue decline of 11% YoY and H1 revenue decline of 12% YoY led by an under execution order book of only ~Rs110bn. Within this, two HAM projects worth ~Rs20bn in Punjab were running slow as well due to administrative delays. Weak revenue also impacted Ebitda margin which came in at 12.3% in Q2 – down 230bps YoY/QoQ. Management downgraded full year FY24 revenue growth estimate to 0-5% vs earlier levels of 10%. Ebitda margin is expected at 13-14% for the full year FY24. 

Subdued growth visibility for FY25 as well: 

Management indicated that 11 HAM projects with EPC cost of ~Rs90bn are likely to received appointed dated over Jan-Mar 2024. These would be key to faster ~10% revenue growth in FY25. Hence only ~Rs110bn of the current Rs200bn order book is currently under execution. While two ropeway HAM orders worth Rs36bn were cancelled, GR announced a fresh small ropeway order worth Rs2bn. Company is targeting further wins of Rs100bn (vs earlier target of Rs200bn) in FY24 but upcoming elections and intense competition remains a key risk. Sluggish wins would keep growth visibility muted. 

Expects to list maiden Invit in FY24: 

Due to regulatory changes, company is now replaced the promoter led entity as sponsor with a third party highway developer. It will now restart the listing process for its maiden public Invit which owns seven operational HAM projects and expects to complete the listing in FY24. This would provide a ready vehicle for ongoing monetisation of portfolio of HAM assets.