Review

In this edition, we have reviewed KNR Constructions Ltd. and National Aluminium Company Ltd. We suggest our reader-investors to HOLD in KNR Constructions Ltd. and National Aluminium Company Ltd.

We had previously recommended KNR Constructions Ltd. in Volume No. 34, Issue No. 16, dated July 8 – July 21, 2019, in the ‘Choice Scrip’ segment. The stock was then trading at Rs287.25 and was recommended based on good growth prospects and higher profitability. KNR Constructions is an infrastructure project development company providing engineering, procurement and construction (EPC) services across various fast-growing sectors.

Looking at the quarterly trends, on a consolidated basis the net sales for Q2FY21 increased by 11.72 per cent to Rs655.88 crore from Rs587.07 crore reported for Q2FY20. It reported an operating profit of Rs179.12 crore for Q2FY21, thus contracting by 3.48 per cent compared to the operating profit of Rs185.57 crore posted for Q2FY20.

The company gained net profit of Rs155.18 crore in Q2FY21, which is an expansion by 107.89 per cent compared to the net profit of Rs74.64 crore gained in Q2FY20. Net sales for FY20 increased by 6.99 per cent to Rs2,451.68 crore from Rs2,291.50 crore reported for FY19.

It recorded operating profit of Rs688.13 crore for FY20, thus expanding by 12.62 per cent against operating profit of Rs611.02 crore posted for FY19. It gained net profit of Rs244.52 crore in FY20,which is a contraction by 6.6 per cent compared to the net profit of Rs261.81 crore gained in FY19. The company has posted better quarterly results than what was expected.

It has received an order from Tamil Nadu government and it also has a strong order book. Hence, we recommend HOLD.

We had previously recommended National Aluminium Company Ltd. in Volume No. 34, Issue No. 16, dated July 8 – July 21, 2019, in the ‘Low Price’ segment. The stock was then trading at Rs50.25 and was recommended based on the company’s sturdy growth momentum across segments, better performance than peers and strong product profile. National Aluminium Company is a Navratna CPSE under Ministry of Mines with integrated and diversified operations in mining, metal and power.

Looking at the quarterly trends, on a consolidated basis the net sales for Q2FY21 increased by 0.48 per cent to Rs2,374.89 crore from Rs2,363.55 crore reported for Q2FY20. It reported operating profit of Rs300.03 crore for Q2FY21, thus expanding by 238.18 per cent compared to the operating profit of Rs88.72 crore posted for Q2FY20.

The company gained net profit of Rs107.45 crore in Q2FY21 compared to the net loss of Rs28.35 crore incurred in Q2FY20. Net sales for FY20 decreased by 26.33 per cent to Rs8,471.84 crore from Rs11,499.32 crore reported for FY19.

It recorded operating profit of Rs761.81 crore for FY20, thus contracting by 76.33 per cent against operating profit of Rs3,218.40 crore posted for FY19. It gained net profit of Rs138.32 crore in FY20, which is a contraction by 92.02 per Rs1,732.40 crore gained in FY19.

Despite the challenging business environment, the company has posted an impressive result in the September quarter and is achieving strong growth in exports. Hence we recommend HOLD
(Closing price as of Dec 14, 2020)