ICICI Securities has used book to bill ratio, diversification, return on capital, working capital intensity and current valuation to arrive at its rating. The brokerage initiates with a Buy on Afcons, NCC, Ahluwalia and Power Mech, Add on HG Infra and Ceigall, and Sell on KNR.
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ICICI Securities Report
Indian engineering and construction industry has witnessed a subdued order inflow since FY24, largely due to the weak macro environment explained by general elections and weak tendering activity. Roads has been particularly weak.
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The subdued environmental has impacted the book to bill ratio of the players. However, we expect mean reversion in order inflow in FY26E/FY27E. A boost in tendering activity will likely be led by improved inflow in core sectors, including road and residential buttressed by investment in clean energy.
The industry remains fragmented. We like companies with diversified EPC execution, presence in less competitive segments, high order book to bill ratio (to tide over near-term weakness in OI) and trading at reasonable valuations.
We initiate coverage on: Afcons, NCC, Ahluwalia and Power Mech with a Buy rating. Add on HG Infra and Ceigall,and Sell on KNR Constructions.
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