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CONSTRUCTION SECTOR REVIEW: POST Q3FY11
Construction sector companies have posted mixed set of numbers for
Q3FY11 with revenues falling largely inline with our estimates with stable
to improved operating margins but net profit growth fell short of
expectation due to higher interest outgo. Order inflow continued to remain
a key concern for the sector as a whole. Inflow was impacted due to change
in key ministries at the state as well as centre level coupled with
environmental issues. Hardening of interest rates as well as liquidity
constraints increased interest outgo for the companies during Q3FY11
owing to working capital intensive nature of the sector. Thus, post Q3FY11
results, we revised our estimates for order inflow for the companies as well
as incorporate higher interest rates going ahead. Sector had also witnessed
de-rating of valuation multiples primarily on account of concerns related to
order inflow, environmental issues as well as higher interest rates.
Post factoring in these concerns, we believe that current order books
continue to provide visibility for next 1.5-2 years and valuations of stocks
have also come down to very attractive levels. We thus continue to remain
positive on the sector and expect inflow momentum to ramp up
significantly from FY12 onwards. Our top picks would be IRB Infra, IVRCL,
Pratibha Industries, Unity Infraprojects and BGR Energy.
Visit http://indiaer.blogspot.com/ for complete details �� ��
CONSTRUCTION SECTOR REVIEW: POST Q3FY11
Construction sector companies have posted mixed set of numbers for
Q3FY11 with revenues falling largely inline with our estimates with stable
to improved operating margins but net profit growth fell short of
expectation due to higher interest outgo. Order inflow continued to remain
a key concern for the sector as a whole. Inflow was impacted due to change
in key ministries at the state as well as centre level coupled with
environmental issues. Hardening of interest rates as well as liquidity
constraints increased interest outgo for the companies during Q3FY11
owing to working capital intensive nature of the sector. Thus, post Q3FY11
results, we revised our estimates for order inflow for the companies as well
as incorporate higher interest rates going ahead. Sector had also witnessed
de-rating of valuation multiples primarily on account of concerns related to
order inflow, environmental issues as well as higher interest rates.
Post factoring in these concerns, we believe that current order books
continue to provide visibility for next 1.5-2 years and valuations of stocks
have also come down to very attractive levels. We thus continue to remain
positive on the sector and expect inflow momentum to ramp up
significantly from FY12 onwards. Our top picks would be IRB Infra, IVRCL,
Pratibha Industries, Unity Infraprojects and BGR Energy.