Infrastructure share price target

Road: ~20,000km awarded by NHAI over FY14-19 Transmission : ~43% growth in transmission capacity in 12th plan vs 11th plan Building : PMAY spending grew at ~30% CAGR...

Road: ~20,000km awarded by NHAI over FY14-19 Transmission : ~43% growth in transmission capacity in 12th plan vs 11th plan Building : PMAY spending grew at ~30% CAGR...

Led by a strong order backlog and the award of appointed dates (AD), we expect sustained execution momentum for road developers under our coverage in Q1FY20. Order inflows, however, were nil owing to the elections. Aggregate revenue is forecast to grow 22% YoY, while we expect earnings to decline 22% due to a higher tax rate post discontinuation of section 80IA benefits. EBITDA margins look stable except for KNRC which could see a decline due to a change...

Building material companies under our coverage are expected to show mixed growth trends during Q1FY20, with revenues of tiles/sanitaryware players forecast to grow in the range of 4-11% YoY, while plywood/MDF companies grow 4-16% and pipe companies 6-21%. Management commentary on growth and margin trajectory for FY20 will be key to watch. CRS (BUY, TP...

While strict adherence to land acquisition norms of 90/80% in EPC/HAM projects has resulted in delays in getting Appointed Dates, it has also helped in preventing time and cost overruns. The new EPC model concession agreement (MCA) made bidding tougher and costlier. Hence bid aggression reduced, with developers exercising caution. With multiple headwinds faced by the sector during FY19, we believe the curing is now over and better times are due. After hitting a lifetime high in roads tenders in FY18 (Rs 1.2tn), infrastructure stocks suffered a severe de-rating from early FY19. This resulted in avg. valuation multiples contracting from 13.5x 1-yr fwd to 6x.

We had recently organized a meeting of investors with Maharashtra State Road Development Corporation (MSRDC) senior officials on Discussion on Mega Infrastructure Projects in Maharashtra. We discussed four key projects that MSRDC is executing and came out with positive vibes on the innovative, time bound and result oriented approach of the corporation in executing these projects. What impressed us most is that despite the humongous scope of the projects, myriad obstacles and political intervention, these projects are likely to set a precedent in the history of infrastructure building in the country on how to plan and execute a mega infrastructure project....

Top Picks: PNC, KNR, NCC. Top Picks Buildings: Capacite, Ahluwalia. Despite strong inflows, most of the Infra stocks corrected 25-60%. Post elections we expect order visibility to improve further. Our coverage universe balance sheets are strong, NWC under control & FC challenges are largely behind.

Top Picks: PNC, Ashoka, NCC & Sadbhav. Top Picks Buildings: JMC Projects, Capacite. Tendering has continued to remain weak: Tendering in roads (by NHAI)has been virtually non existent in 9MFY19 as compared to the ~7,400km/Rs 1.2tn of awards in FY18. There is a likelihood of tendering picking up as we close in on the elections (with the model code of conduct to kick in). We could see at best ~Rs 500bn of actual awards over the next 2 months even though projects worth ~Rs 900bn are listed for tendering (EPC share is >70%).