Government’s Bharatmala project can lead to significant upper hitting for infrastructure stocks, says Chakri Lokapriya of TCG AMC. (Image: Reuters)
As infrastructure in India gets the much needed thrust, as government plans to build thousands of kilometres of roads and highways over the next five years at a cost of about Rs 7-lakh crore, investors may be on the lookout for investment opportunities in the sector. In an interview to ET Now, Chakri Lokapriya ,Chief Investment Officer & Managing Director of TCG AMC said, “EPC (Engineering Procurement Construction) companies have seen a slowdown because of stalled road projects, stalled various infra projects. So now if the Bharatmala project does even portion of that ( 83,000 kilometres of roads at an investment of Rs 6.9 lakh crore), it can lead to a significant upper hitting for these infrastructure stocks.”
As part of country’s biggest highway development plan, the government yesterday, approved the Phase 1 of Bharatmala project to develop and expand approximately 40,000 km of roads at an investment of Rs 3.5 lakh crore by 2022. We take a look at three stocks which may benefit from the Infrastructure boom.
Ashoka Buildcon
Jefferies LLC, an American global investment bank is bullish on the infrastructure space in India. According to the firm, the coming quarters will see a lot of infrastructure projects execution. The research firm had suggested Ashoka Buildcon as a buy in September this year. In August this year, ICICI Securities said, “Considering strong track record, robust orderbook, well funded BOT project portfolio & huge opportunities ahead, we stay positive on Ashoka’s long term prospects. Hence, we expect EPC revenues to grow robustly at 21.0% CAGR to Rs 3085.9 crore. Hence, we maintain our BUY recommendation with a SoTP based target price of Rs 210 per share.” Ashoka Buildcon shares were trading at Rs 209, up by more than 8.5% on NSE this morning.
Sadbhav Engineering
Sadbhav Engineering shares zoomed 7% on Wednesday morning to Rs 313. According to Jefferies, Sadbhav Engineering is a buy with a target price of Rs 330. Jefferies had said that the traffic growth is likely to remain tepid in Q2, just like the previous three quarters. “In road projects, SEL has submitted bids for 9 EPC projects worth ~Rs 65 billion and will participate in 15 EPC projects worth ~Rs 130 billion for which bids have to be submitted by Sep’17. Apart from these, there are 11 HAM projects worth ~Rs 140 billion in the pipeline. The company is also targeting metro construction projects in the transport segment. In the mining business, the pipeline includes 3 mining projects worth ~Rs 16 billion. On the irrigation side, SEL would participate in projects in Madhya Pradesh, Gujarat and Rajasthan worth ~Rs 40 billion,” noted Axis Direct in a report. The brokerage firm has a target of Rs 336 on the shares of Sadbhav Engineering.
IRB Infrastructure
IRB Infrastructure shares gained more than 5.5% on Wednesday and were trading at Rs 226 on NSE this morning. In September this year, Jefferies had a buy rating on the shares of the company. IRB Infrastructure, which executed the country’s first build-operate-transfer (BOT) road project, is one of the largest operators of such ventures. It has more than 3,404.40 lane kilometres operational and about 2330.4 lane kilometres under development. Kotak Securities had maintained a buy call on IRB Infra, after the company said it will raise Rs 544 crore by transfer of its Amritsar-Pathankot Project to IRB InvIT, earlier this month. This will be the seventh project the company will transferring to IRB InvIT after the launch and listing of India’s first InvIT Fund in May 2017.
Track live stock prices: Ashoka Buildcon, Sadbhav Engineering and IRB Infrastructure
Porinju Veliyath, CEO and MD of Equity Intelligence India, is bullish on the prospects of the infrastructure space in the next 10 years. He believes that there maybe a few L&Ts in the making. L&T has a market capitalisation of more than 1,64,000 crores. Porinju believes that currently, there are at least 2-3 large companies in the sector, which have the potential to reach the 1 lakh market capitalisation figure in the next decade. Speaking to BTVi recently, he said, “ In the next 10 years, the infrastructure development in India is going to be a huge game changer. I’m looking at the next L&Ts.”
