GR Infra stock: Kotak sees a 39% decline, while other experts have variable results

GR Infra stock: During Thursday’s trading session, shares of G R Infraprojects Ltd surged by over 4 percent initially but later relinquished their gains as the session unfolded. Brokerage firms maintained a mixed outlook on the stock, with certain analysts indicating a potential downside of 40 percent in the counter.

GR Infraprojects recorded a significant 42.1 percent year-on-year (YoY) increase in net profit, reaching Rs 553.1 crore for the fourth quarter ending on March 31, 2024. The company’s revenue from operations also saw a modest 1 percent YoY rise, amounting to Rs 2,485.1 crore in the same quarter.

At the operational level, EBITDA surged by 19.4 percent to Rs 540.3 crore during the fourth quarter of the fiscal year, compared to Rs 670.5 cr in the corresponding period of the last year. The EBITDA margins for the reporting quarter stood at 21.7 percent, as per the company’s financial statement for the period.

Shares of GR Infraprojects experienced a 4.06 percent increase, reaching Rs 1619.50 during Friday’s trading session, although they partially retreated from their gains. The company commanded a total market capitalization of over Rs 15,500 crores. In the preceding trading session on Thursday, the stock had settled at Rs 1,556.25.

FY24 proved to be a challenging year for GR Infraprojects in terms of securing new orders, leading to a 14 percent decline in the resultant order book. Only 58 percent of the existing order backlog is currently executable, contributing to a subdued guidance for FY2025. Kotak Institutional Equities forecasts flat revenue growth and margins ranging between 13-14 percent for the upcoming fiscal year.

Despite these challenges, GR Infra’s performance exceeded expectations, attributed to consistent execution and better-than-anticipated margins. Kotak has revised its estimates upwards by 10 percent for FY2025 and by 6 percent for FY2026, reflecting an improvement in execution and margins. However, they maintain their ‘sell’ recommendation on the stock, assigning a fair value of Rs 990, implying a potential 39 percent decrease in the stock price.

In Q4FY24, GR Infraprojects recorded a 13 percent year-on-year expansion in its top line, while EBITDA margins surged by 320 basis points YoY, primarily due to the receipt of an early completion bonus during the quarter. The company concluded the quarter with an order book (including L1) worth Rs 21,100 crore. Additionally, its InViT was listed during the quarter, through which it monetized seven assets, resulting in a gain of Rs 1,400 crore, according to Nuvama Institutional Equities.

Nuvama Institutional Equities highlighted the positive aspects of GR Infraprojects’ low leverage levels (net D/E 0.05x) and increasing segmental diversification. They have revised their FY25E and FY26E EPS upwards by 3 percent and 5 percent respectively, along with an adjustment in the P/E multiple from 15 times to 20 times. They maintain a ‘hold’ tag on the stock with a revised target price of Rs 1,576. -GR Infra stock

Motilal Oswal Financial Services noted that GR Infraprojects’ performance in 4QFY24 was broadly in line with expectations. While revenue growth and margins are expected to be subdued in FY25, they anticipate a significant improvement in FY26. The company aims to diversify its order book by actively bidding for projects in transmission, ropeway, tunneling, and MMLP.

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Motilal Oswal Financial Services has marginally increased their FY25 and FY26 EPS estimates by 3 percent and 4 percent respectively. They anticipate GR Infraprojects to achieve a 9 percent revenue CAGR over FY24-26, with EBITDA margins ranging between 13-15 percent. They maintain a ‘buy’ rating on the stock with a revised target price of Rs 1,790.