Shares of PNC Infra, Ashoka Buildcon, Dilip Buildcon, KNR Constructions, GPT Infraprojects, and H.G. Infra Engineering are gaining attention as order inflows, which were slow in the first quarter of FY25 due to general elections, are picking up speed.
Over the past month, shares of these companies have increased by up to 8%. However, IRB Infrastructure’s share prices have dipped recently, although they have almost doubled over the past year, leading to some expected corrections.
Analysts have noted a clear improvement in order inflows over the last few months, particularly in road construction.
Road Construction Order Inflows Increase
Vinay Kumar G, Vice President & Sector Head at ICRA Limited, stated that road project awards gained momentum, with 589 kilometers awarded in August 2024, which is a 27% increase compared to July 2024. However, this is still 7% lower than the awards in August 2023.
In the first five months of FY25, road awards totaled 1,152 kilometers, which is a 34% drop from the 1,756 kilometers awarded in the same period last year. ICRA estimates that the Ministry of Road Transport and Highways (MoRTH) will award between 8,500 and 9,000 kilometers of road projects in FY25, similar to last year’s total of 8,581 kilometers. With more clarity in project awards from MoRTH, the pace is expected to pick up from September 2024, although it will still be significantly lower than the levels seen between FY21 and FY23.
Nuvama analysts noted that road awards were slow in Q1FY25 due to the elections but have gained traction since, with NHAI and MoRTH awarding 468 kilometers of projects in July 2024, compared to 91 kilometers in June 2024 and 514 kilometers in July 2023. Overall construction reached 600 kilometers in July, slightly down from 646 kilometers in June.
Despite the positive outlook, competition remains fierce, and concerns about profit margins for construction firms persist. Nuvama analysts advise road developers to diversify their segments, as the ability to secure road orders at desirable margins is now under scrutiny. They recommend focusing on companies with strong financials, like PNC Infratech.
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