Stock Market Today: PNC Infratech , Ashoka Buildcon, KNR Constructions share price have risen 47-167% in a year. The gains have been led by government capex providing strong infrastructure push. The strong order book and pick up in execution have lifted the earnings.
The impact of the Lok Sabha Elections’2024 however may be felt by sector on order flows and even the execution in Q1, though forward earnings growth prospects remain intact.
Muted Q1 expectations
During 1QFY25, the overall highway construction stood at 1,288km versus 1,465km in 1QFY24 due to elections, extreme heat and unavailability of labor, said Nirmal Bang Institutional Equities . Easing of raw material prices and commodity costs could however may lead to some improvement margins YoY in 1QFY25.
Analysts at Motilal Oswal Financial Services expect revenue to remain flattish year-on-year and decline 13% sequential for companies under their coverage. In line with execution MOFSL analysts expect operating profit for their coverage to be flat YoY (lower 9% sequentially). Due to weak operating performance, the aggregate net profit for companies under MOFSL coverage universe is expected to decline 7% YoY and 23% sequentially during 1QFY25.
Ashoka Buildcon may still perform decently and Nirmal Bang analysts expects 6% YoY increase in 1QFY25 on the back of strong orderbook execution with Ebitda margin expected to expand to 9.1% versus 7.4% in 4QFY24. Net Profit is expected to jump by 39.2% sequentially. Ashoka Builcon Orderbook as of March’24 stood at Rs11690 Crore (1.5 time FY24 revenues).
For KNR Construction: Nirmal Bang expects revenue to increase by 5.6% YoY while for PNC Infratech revenues may grow 5.5%. Net profit for KNR Construction though may decline by 16.1% YoY, for PNC Infratech net profit may rise 3.1% as per Nirmal Bang estimates
Order flows to catch pace in Q2FY25
Amid general elections in June’24, the awarding activity though remained muted in 1QFY25 it is likely to pick up from Q2 said analysts. NHAI targets to award ~5,000kms in FY25 and had awarded 2500 km in FY24, highlighted analysts at Motilal Oswal Financial Services.
Companies with strong order book , balance sheet better placed.
Focus of companies will remain on orderbook diversification in Non-road said Nirmal Bang Institutional analysts. Ashoka Buildon as per them targets to achieve orders worth Rs12,000-13,000 crore in FY25. By June-end, it is likely to have received Rs2000-3000 Crore orders, said analysts Nirmal Bang.
KNR Construction wants to diversify further into Railways, Irrigation (in states other than Telangana) and Mining projects. The company’s net debt-free status on a standalone basis and strong balance sheet will power robust growth said analysts at Nirmal Bang.
PNC Infratech is expecting Rs8000-10000 crore worth of new orders (excluding Rs5000 crore already secured) in FY25. PNC has improved execution in its Water segment and expects it to be the key growth driver in FY25, said Nirmal bang analysts.
KNR Construction remains preferred pick of Motilal Oswal due to its favorable net cash balance sheet .
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