Ashoka Buildcon, PNC Infratech, KNR Construction: 3 Infra Stocks To Buy Ahead Of Lok Sabha Elections

There has been an uptick in the momentum of project flow in the construction sector since February month, and this is likely to continue till the Lok Sabha elections code of conduct. Brokerage Nirmal Bang said the construction sector is expected to maintain buoyancy ahead due to the government's infra push. Accordingly, the brokerage has recommended buying three stocks.

As per Nirmal Bang's report, the Construction sector saw a slowdown in awarding activities in 9MFY24 due to government policy guidelines such as the requirement for full permissions before project awards and the need for Cabinet approval for new projects following cost overruns in Bharatmala Phase 1.

However, the sector is picking up pace. Nirmal Bang's report highlighted that awarding activities for roadways were low till January 24. However, the NHAI+MORTH granted some contracts in Feb'24 and the momentum is expected to continue until the LS election code of conduct is implemented in March'24.

"During our interactions, the construction companies confirmed that the awarding activity will pick up pace post-elections," Nirmal's note said.

Hence, the brokerage added that the Construction industry is expected to maintain buoyancy, driven by: (a) Bharatmala & Sagarmala Pariyojana (b) Atal Mission for Rejuvenation & Urban Transformation (c) Jal Jeevan Mission (d) PM Gati Shaki Plan and (e) The government's consistent spending on infrastructure.

Here are the top three stocks to buy:

Ashok Buildcon: BUY For Target Price Of Rs 218

On March 15, the stock was at Rs 163.20 apiece with a market cap of Rs 4,581.40 crore. YTD, the stock zoomed by 19.2% on the exchange.

Ashoka Buildcon is a developer of highway projects. It develops and builds infrastructure facilities based on build, operate, and transfer (BOT), public-private partnership (PPP) and engineering, procurement, and construction basis (EPC). The company also provides ready-mix concrete (RMC) and Bitumen.

PNC Infratech: BUY For Target Price Of Rs 520

Currently, PNC Infratech's share is at Rs 413.65 apiece, with a market cap of Rs 10,611.74 crore. The upside is over 17.4% YTD on BSE.

PNC Infra provides end-to-end infrastructure implementation solutions that include design, engineering, procurement, construction, O&M services on fixed-sum turnkey (EPC), "Design-Build-Finance-Operate-Transfer" (DBFOT) Toll, Annuity, Hybrid Annuity, Operate-Maintain-Transfer and other formats, under one roof.

KNR Construction: BUY For Target Price Of Rs 343

At present, KNR's stock is at Rs 240.45 apiece with a market cap of Rs 6,762.29 crore. Unlike PNC and Ashoka, KNR's YTD performance is down by 6.8% on BSE.

KNRCL is a multi-domain infrastructure project development company providing (EPC) engineering, procurement and construction services across various fast-growing sectors namely roads & highways, irrigation and urban water infrastructure management.

Nirmal Bang cited some of the major infra push post-Lok Sabha Elections announced by the government. They are:

1. During the interim budget, the capital outlay for FY25 has seen an 11.1% YoY increase, reaching Rs11Tn. Notably, Rs2.8Tn and Rs2.6Tn are earmarked for spending on Roads and Railways, respectively.

2. The Road Ministry has set a target to award 5,200 km of BOT-toll projects in FY25 based on revised concession agreements.

3. The Ministry of Road Transport and Highways (MoRTH) plans to award 14 new expressways covering 2,279 km with an estimated investment of Rs1.3Tn. Land acquisition challenges have led to delays in awarding activities, which stood at 2,815 km during Apr-Nov'23 vs 5,382 kms in the same period last year. Despite this, MoRTH aims for 10,000 km awards in FY24.

4. Road construction during April-Dec'23 stood at 6,216 km, surpassing the 5,774 km achieved in the same period last year. The NHAI achieved its highest monetization target of Rs450bn in ongoing FY24.

5. The NHAI's toll collections grew remarkably, reaching Rs480.2bn in FY23 vs Rs177.6bn in FY16. The government has set a target of achieving 15% CAGR till FY30 to Rs1.3Tn.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.