Q3 result preview: Construction sector expected to see revenue growth of 10% YoY; margins to remain stable
Dilip Buildcon, PNC Infratech and KNR Constructions. However, NCC is estimated to report a higher 37% YoY sales growth, driven by its strong order book, which is highest among peers. For toll-based assets, the brokerage firm forecast 5% sequential rise in revenue.
It factors in a steady EPC EBITDA margin for the companies, similar to that in 2QFY24. The government’s capex on the infrastructure sector via budgetary support, and investment in public sector undertakings (PSUs) by way of internal and extra budgetary resources (IEBR) grew at a 15% CAGR (FY16-23). Also Read: Q3 Results Preview: Demand for hotels expected to blossom, says Prabhudas Lilladher; Lemon Tree remains top pick Meanwhile, the brokerage noted that project execution in the years of general elections fell by an average 5% YoY in four prior instances.
This was independent of whether there was a change in the government or not. The next general elections are scheduled in May 2024 and InCred Equities expects a strong execution in FY24, followed by a dip in growth in FY25. “The average order book-to-sales ratio was at 2.5x, a tad lower than that in Mar 2023 (2.8x).
Order inflow in H1FY24 was lower than the run-rate in FY23. Around 24% of the latest order book must be funded by private road developers, just like in FY19," said the brokerage firm in a report. Order inflow in H1FY24 accounted for 21% of the order book.
The brokerage firm factors in a 10% average EPC sales CAGR (FY23-25F), like the FY20-23 CAGR. When compared to the Mar 2023 OB-to-sales ratio, the latest OB-to-sales ratio is lower for PNC Infratech, KNR Constructions, Dilip Buildcon and IRB Infrastructure and higher for NCC. NCC, PNC Infratech and KNR Constructions are trading at a premium to
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