Road award dip in April-May will not impact long term goals, bullish on Infrastructure sector; say analysts

The total road awarding was hardly around 100 kilometers in April and May. Nonetheless, Axis Securities remains optimistic on the long-term prospects of PNC Infratech, HG Infra Engineering Limited, and KNR Constructions.

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Fewer road awards in April and May will not affect long-term project pipeline, said analysts.

The road construction sector experienced a slowdown in road project awards during April and May. The National Highway Authority of India (NHAI) halted road project awards during this period, resulting in no Letter of Offer Acceptance (LOAs) being issued, as reported by Nuvama Institutional Equities. However, the situation is expected to have no significant impact on the long-term project pipeline, as March witnessed a significant surge in road awarding.

In March, the total road awarding stood at 4,878 kilometers, with the NHAI awarding 2,627 kilometers of the projects. In contrast, road awarding in April and May was minimal, with only around 100 kilometers awarded by the Ministry of Road Transport and Highways (MoRTH) over the two-month period. No projects came from NHAI during this time.

Despite the temporary slowdown, analysts remain positive about the infrastructure sector, particularly in the long run. Axis Securities highlighted the NHAI’s plans to award numerous road projects under the Bharatmala Pariyojana, a flagship program of the central government aimed at building highways and expressways. This is expected to drive the momentum of road construction. Additionally, Axis Securities anticipates an increase in awarding activities in FY23, as it is a pre-election year.

“With the NHAI looking to award many road projects under central governments flagship program Bharatmala Pariyojana for building highways and expressways, pace of road construction will gain further momentum,” said Axis Securities in a report dated June 8.

Also read Lodha, Oberoi Realty and others poised to benefit from Mumbai’s infrastructure boom

PNC Infratech

PNC Infratech’s diversified order book and better execution process will help the company post a 12 percent revenue CAGR in FY22-25, said Axis Securities. Revenue Compounded Annual Growth Rate, or CAGR, measures the average annual revenue growth. The company’s management is expecting orders worth Rs 10,000-Rs 12,0000 crore in FY24. Axis Securities has maintained a Buy order on the stock at Rs 425.

HG Infra Engineering Limited

Axis Securities expects HG Infra Engineering Limited to grow at EBITDA CAGR of 18-20 percent in FY22-25. The management is expecting an order inflow of Rs 8,000-Rs 9,000 crore in FY24. Axis Securities maintains a buy order on HG Infra Projects Limited at a target price of Rs 1,105.

KNR Constructions Limited

The company expects an order inflow worth Rs 4000-Rs 5000 crore in FY24. Axis Securities expects KNR Construction’s revenue to grow at a CAGR of 13 percent over FY22-25. “The company is looking to diversify to other segments such as Railway, Metros, and Urban Infra to keep the revenue stream unaffected apart from the road segment,” said the broking firm. Axis Securities has maintained a buy order on the stock at a target price of Rs 325.

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