According to domestic brokerage and research firm HDFC Securities, Tier-1 infrastructure developers are trading at ~8.5x 1-year forward valuations and the recent correction presents an attractive entry point for strong balance sheet players, which should increase the competitive intensity. hopes to reduce. Order books are full and in recent bids we are seeing fewer companies and bids are below cost.
“The intention of the government to expand highway programs augurs well for rewarding the project. With the debt restriction on NHAI (capex financed by budgetary support), we expect its balance sheet to improve. Asset monetization may further strengthen the balance sheet of NHAI as sovereign funds have recently shown strong interest in NHAI and private road projects,” the note said.
HDFC Securities’ top stock picks In the infra sector there are GR Infra, KNR, PNC Infra, HG Infra and NCC. Within capital goods, Larsen & Toubro (L&T), Cummins India and Kalpataru are its preferred picks.
Tier-1 developers remain cautious and seem to be choosing balance sheet over development. This augurs well for long term revaluation and asset creation.
The brokerage’s buy tag on infra shares includes GR Infra, with a target price of 2,266, Hg Infra (TP: 980), KNR Constructions (TP: 350), PNC Infratech (TP: 407), NCC (TP: 108), Ashok Buildcon (TP: 140), Ahluwalia Contracts (TP: 542), JMC Projects (TP: 142), PSP Projects (TP: 705), ITD Cementation (TP: 126), Dileep Buildcon (TP: 369).
In the meantime, add to this the recommendations on IRB Infra Developers with a target price of 284 and J Kumar Infraprojects share price with a target price of Rs. 364.
“Infrastructure asset creation is the top priority of the present government, which can lead to strong orders in the next decade,” the note said.
HDFC Securities Caution remains optimistic as HAM projects being bid up like EPC projects will lead to equity crunch and delay in execution. With a strong balance sheet, conservative bidding stance and secured funding, EPC players stand to outperform as the dust settles.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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