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Axis Securities Report
For road construction companies under our coverage universe, we expect revenue/Ebitda/adjusted profit after tax growth of 14%/19%/27% YoY as better execution and softening in commodity prices support higher profitability during the quarter. H2 (the second half of the year) is normally a strong period in terms of project execution along with bidding and awarding activity accelerating and gaining pace during the period.
During Q3 FY23, project awarding by the National Highway Authority of India gained momentum and it awarded 1550 km of the project in Oct-Nov 2022 against 810 km in H1 FY23. Since H1 FY23 was soft in terms of project awarding, NHAI will have to increase the pace to meet its target project awarding of 6,500 km in FY23.
Most of the companies have indicated that the tender pipeline is robust and strong awarding is expected in Q4 FY23. In terms of construction, the NHAI is looking to construct 5,000 km of roads in FY23 and total construction till Nov 2023 stood at 2,100 km.
For our coverage universe, most of the companies have robust order books with revenue visibility ranging between two-three years. We expect execution to remain robust moving ahead.
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