[ad_1]
Pick-up in revenue helped better absorption of fixed cost
According to Sharekhan, despite the quarter being affected by COVID-19-related problems, the infrastructure sector recorded a 52.6 percent year-over-year increase in revenue (down 24.1 percent q-o-q), as all companies save Sadbhav Engineering Limited (SEL) reported better-than-expected execution.
Liquidity limitations and delays in receiving scheduled dates for EPC contracts continued to plague Sadbhav Engineering.
Higher execution, lower depreciation (down 10% y-o-y), and lower financing expense (down 19% y-o-y) drove operating profit growth of 57 percent y-o-y and net profit increase of 2.7x y-o-y in our infrastructure universe (ex-SEL), the brokerage says.
Outlook and valuation on Infrastructure space
“The infrastructure sector may see seasonal impact on execution although order book tendering and execution is expected to gather pace from Q3FY2022. We expect the logistics sector to benefit from pick-up in demand expected from August 2021 with the onset of the festive season, the brokerage has said.
Valuation
“We choose firms like KNR Construction, PNC Infratech, and Ashoka Buildcon in the infrastructure market because they have a high order backlog, timely execution skills, and robust balance sheets. We choose companies with asset-light business strategies, such as Mahindra Logistics, Transport Corporation of India, and TCI Express, and organisations with high-quality assets, such as Gateway Distriparks,” the brokerage has said.
3 Infrastructure Stocks To Buy For Gains In Future
Key Risks
Macroeconomic weakness would lead to lowering of estimates and valuation multiples of companies.
Leaders in Q1FY2022: KNR Constructions, Ashoka Buildcon, PNC Infratech
Preferred Picks: KNR Construction, PNC Infratech
| Infra company | Current Market Price | Rating | Target Price |
|---|---|---|---|
| Sadbhav Engineering | Rs 48.20 | Hold | Rs 68 |
| KNR Constructions | Rs 319 | BUY | Rs 350 |
| Ashoka Buildcon | Rs 101.80 | BUY | Rs 125 |
| PNC Infratech | Rs 360 | BUY | Rs 386 |
Disclaimer
The above stocks are based on the report of Sharekhan. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks. Please consult a professional advisor.
[ad_2]
Source link
