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Business News/ Money / Earnings Preview: Construction Sector
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Earnings Preview: Construction Sector

Earnings Preview: Construction Sector

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Performance of the construction sector in fiscal 2009 was impacted by lower than expected order inflows, higher interest rates as well as higher commodity prices in the first half of 2009.

However, we believe that post the election results as well as budget announcements regarding higher allocation for various segments, order inflow is expected to witness an improvement in fiscal 2010.

Easing of commodity prices is also likely to provide breather to companies having higher proportion of fixed price contracts.

Higher flexibility is also given to IIFCL for funding infrastructure projects to the tune of Rs1,000 billion as against Rs750 billion earlier.

Along with this, easing of interest rates and easier availability of credit has resulted in abating concerns regarding funding of high working capital requirements.

Several companies are also in the process of raising money through QIP issues, thereby their leverage ratios are likely to improve going forward.

We continue to maintain our positive stance on the sector with more bias towards companies focused on government spending as against private sector.

Our top picks remain IVRCL, Nagarjuna Constructions, Patel Engineering and Unity Infraprojects.

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Published: 16 Jul 2009, 08:28 AM IST
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