KNR Constructions sees mining-led growth as order book strengthens

Investment View and Valuation

Prabhudas Lilladher’s August 15, 2026 Q1 FY27 result update on KNR Constructions maintains a HOLD rating and raises the target price to Rs 126 per share from Rs 119. The broker considers the order-book build-up healthy and sees mining as KNR Constructions’ next growth leg. However, near-term upside is viewed as limited because the stock trades below book value while still commanding 18x FY28E EPS.

The Rs 126 target is based on a sum-of-the-parts approach. A 9x FY28E earnings multiple values EPC operations at Rs 65 per share, while BOT and HAM projects contribute Rs 62 per share.

Q1 FY27 Operational Performance

KNR Constructions reported a weak Q1 FY27 operational performance. Revenue was Rs 4,367 mn, down 10 per cent year-on-year and 5 per cent below Prabhudas Lilladher’s estimate of Rs 4,592 mn. Delayed commencement of new HAM and mining projects, land-acquisition issues in Karnataka HAM packages and initial execution challenges constrained performance.

Reported revenue included a Rs 760 mn one-off relating to the IndInfravit asset monetisation transaction. Adjusted revenue was Rs 3,607 mn, down 25 per cent year-on-year. Reported EBITDA was Rs 655 mn, with a 15.0 per cent margin, while adjusted EBITDA after one-off expenses of Rs 460 mn was Rs 195 mn and the adjusted margin was 5.4 per cent. Adjusted PAT was Rs 378 mn, down 26 per cent year-on-year. Reported PAT included an exceptional Rs 2,800 mn gain from the sale of two SPVs to IndInfravit.

Order Book and Execution Visibility

Order visibility remains the central support for the outlook. KNR Constructions’ Q1 FY27 order book was about Rs 8,700 crore, equivalent to around four times trailing revenue, with an additional Rs 6,600 crore of L1 orders.

Management is targeting FY27 order inflows of Rs 8,000-10,000 crore across roads, irrigation, energy and state-government EPC projects. The company is retaining a selective bidding approach focused on execution visibility, returns and disciplined bidding.

Growth Outlook and Financial Estimates

Management reiterated FY27 revenue guidance of Rs 22,000-23,000 mn and EBITDA margin guidance of 8-9 per cent, excluding one-offs. Execution is expected to improve materially from Q3 FY27 as the Chennai ECR HAM, Telangana HAM and Kusmunda MDO projects ramp up.

For FY28, management targets revenue above Rs 30,000 mn and EBITDA margins of 11-12 per cent. Prabhudas Lilladher’s estimates are as follows:

Mining: Growth Catalyst and Timing Risk

Mining execution is a key catalyst as well as a timing risk. Kusmunda MDO is expected to start in September 2026, contributing about Rs 1,500 mn of FY27 revenue and around Rs 4,000 mn annually thereafter. Banhardih MDO is awaiting Stage-II forest clearance and is expected to begin in FY28, with a further annual revenue opportunity of about Rs 5,000 mn.

KNR Constructions plans Rs 3,500-4,000 mn of FY27 mining capex and expects mining PAT margins above 6 per cent. Caterpillar and Komatsu equipment buyback arrangements are intended to lower maintenance costs and improve fuel efficiency.

Liquidity and Capital Allocation

KNR Constructions is debt-free on a standalone basis and had standalone cash of Rs 3,100 mn in Q1 FY27. The company expects Rs 10,000 mn from an asset sale. A share buyback is under consideration by the Board, although management will balance shareholder distributions with mining capex and HAM equity needs.

Key Risks

• Delayed commencement of projects, including new HAM and mining projects.
• Land-acquisition issues affecting Karnataka HAM packages.
• Delay in obtaining Stage-II forest clearance for the Banhardih MDO project.
• Elevated irrigation receivables of about Rs 1,300 mn from Telangana Kaleshwaram Package-4.
• Timing of government collection approvals.