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With National Highways Authority of India's (NHAI) plans of tightening the bidding criteria and bid pipeline of 16,284 kms to be awarded in next few months, domestic brokerage and research firm Yes Securities expects organized players to bag healthy orders in FY23. 

The government’s strong infra push by NIP, GATI Shakti and Budget 2022‐23, rising toll prices, most infra companies having robust order book and healthy bid pipeline are expected to witness a strong profitability with improved return ratio’s, as per the brokerage. 

“We continue to prefer companies with strong balance sheet, low debt levels, good corporate governance, well managed working capital cycle and high book to bill ratio which provides a robust revenue visibility over next 2‐3 years," the note stated. The brokerage house is bullish on GR Infra, KNR Constructions, HG Infra and are its top stock picks.

Yes Securities' top infra stock picks -

GR Infra Engineering: In‐house integrated model of design and engineering team and owned construction equipment base gives GR Infra a competitive edge over its peers. Robust order inflows leading to comfortable order book‐to‐sales. Lean balance sheet despite exposure to HAM portfolio are the key investment rationale, as per Yes Securities.

KNR Construction: Robust order book, strong beneficiary from the ongoing uptick in infra sector, focus on monetizing of HAM assets thereby strengthening the balance sheet, the note said.

HG Infra Engineering: Transition into full fledge contractor, robust order inflows leading to comfortable order book‐to‐sales, lean balance sheet despite exposure to HAM portfolio, it added.

In FY23, NHAI aims to speed up the construction activity to 48kms per day and it plans to award 8,700 kms in FY23E vs (6,306 kms in FY22). NHAI’s tender pipeline remains strong with over 34,732 kms to be awarded, giving huge opportunities for the road players to tap over the next 2‐3 years, said the brokerage. 

“Of this, 28% of the projects would be on HAM mode, 12% on EPC mode, 2% on Item rate, 1% on BOT (Toll) while 58% of the projects are yet to be decided by NHAI. Awarding under BOT projects have been almost non‐existent in the last few years as private investors refused to take risk," Yes Securities added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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