KNR Constructions sees FY28 recovery as mining project execution ramps up

Investment View and Valuation

Motilal Oswal Financial Services said KNR Constructions delivered another weak 1QFY27 performance, principally because a thin executable order book constrained execution. The broker expects operating performance to improve in 2HFY27 as mining projects ramp up, while more meaningful revenue growth is expected from FY28 when recently won orders enter execution.

The broker retained its Neutral rating and maintained a sum-of-the-parts based target price of Rs 140, compared with the current market price of Rs 132.

1QFY27 Financial Performance

Reported EBITDA included a one-time income of Rs 40 crore, resulting in an underlying EBITDA margin of only 5.5%. Adjusted profit after tax declined about 13% year-on-year to Rs 37.8 crore, but exceeded the broker's estimate of Rs 30.9 crore.

KNR Constructions also booked an exceptional gain of Rs 280 crore after transferring its entire equity stakes in KNR Palani Infra and KNR Ramagiri Infra to Indus Infra Trust for Rs 430 crore. The invested amount was Rs 150 crore, while tax on the gain was Rs 40 crore.

Execution Outlook and Management Guidance

Management said the underlying margin should remain near its current level in 2QFY27 and improve in 3QFY27 and 4QFY27. For FY27, it guided for order inflows of Rs 8,000 crore to Rs 10,000 crore, revenue of about Rs 2,200 crore to Rs 2,300 crore, and an EBITDA margin of 8% to 9% based on the executable order book.

Order Book Position

The reported current order book was about Rs 11,500 crore, including a Rs 3,550 crore mining project. As of June 2026, the order book was Rs 8,670 crore, excluding the recently won Rs 6,560 crore HAM project. Its mix was 30% roads, 19% irrigation, 10% pipeline and 41% mining. KNR Constructions also held an L1 position of about Rs 1,500 crore, although some letters of intent and orders were pending.

Mining Projects and New Business Opportunities

The Vemardi coal mine in Jharkhand, won in 1QFY26 through a 74:26 joint venture with NCC and valued at Rs 4,800 crore excluding GST, is expected by management to commence in 2HFY27. It is expected to generate Rs 300 crore to Rs 400 crore of revenue when fully operational.

Management remains cautious on battery energy storage system projects because of competitive bidding, project-specific risks and currency exposure, and has not assumed meaningful revenue from this segment. KNR Constructions is also exploring entry into metro, railway, BOT toll and solar projects through joint ventures.

Key Risks and Balance-Sheet Concerns

• Muted road awarding and uncertain tender timing could constrain order inflows and execution.
• Working-capital days increased to 133 in 1QFY27 from 78 at March 2026, while debtor days rose to 196 from 152.
• Irrigation receivables of Rs 1,400 crore to Rs 1,450 crore represent the largest near-term balance-sheet risk, with recovery dependent on government approvals.
• The revised HAM equity requirement is Rs 850 crore, of which Rs 600 crore had been infused. A further Rs 210 crore is required, comprising about Rs 125 crore in FY27 and Rs 85 crore in FY28.

Earnings Estimates

Motilal Oswal forecasts FY26 to FY28 revenue and EBITDA compound annual growth of 22% and 48%, respectively. The estimates reflect a recovery in operating performance as mining projects ramp up and recently won orders begin execution, particularly from FY28.