5 Infrastructure Stocks to Watch Out for Pre-Budget Gains ahead of Union Budget 2025

The Indian government's infrastructure spending has been a key driver of growth in recent years. In the 2024-25 budget, a record Rs 11.1 trillion (tn) was allocated for infrastructure, continuing the trend from last year's Rs 10 tn spend.

This focus on projects like rural roads and flood management underlines the government's commitment to a more connected India.

Construction, cement, and steel sectors are poised to benefit significantly. With programs like the Pradhan Mantri Gram Sadak Yojana and interest-free loans to states, the momentum is set to pick up.

For investors, these ongoing initiatives present a solid opportunity. Infrastructure stocks are likely to see pre-budget gains as the market anticipates further government support.

In this article, we highlight top infrastructure stocks that stand to gain from India's expanding infrastructure plans.

Take a look...

#1 RITES

First on our list is RITES.

RITES, a central public sector undertaking within the Ministry of Railways, is renowned for its diverse expertise in engineering and consultancy.

The company provides a wide array of services covering the entire project lifecycle, from inception to completion, across various aspects of transportation infrastructure and associated technologies.

A string of recent order wins has bolstered RITES' near-term revenue visibility.

These include a Rs 4.1 bn contract for infrastructure development at IIT-Bhubaneswar, a Memorandum of Understanding to support North Eastern Electric Power Corporation (NEEPCO) with rail infrastructure projects, and a Rs 3.1 bn pact with CFM Mozambique for the supply of diesel locomotives.

These contribute to RITES' robust order book position, which stood at a healthy Rs 54 bn as of the December 2023 quarter.

Significantly, nearly half of this order book comprises high-margin consultancy services, ensuring strong profitability.

Between 2020-2024, the sales and net profit have registered a 5-year CAGR of 2.7% and 0.2%, respectively.

The return ratios have been strong, with the company reporting a 5-year average Return on Capital Employed (RoCE) of 28.7% and Return on Equity (RoE) of 21%.

Rites Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	21.50%	-25.30%	46.60%	-6.10%	-8.80%
Operating Profit Margin (%)	27.00%	29.00%	27.00%	29.00%	27.00%
Net Profit Margin (%)	28.90%	27.10%	22.40%	25.30%	24.10%
Return on Capital Employed(%)	33.10%	24.80%	29.60%	30.00%	25.90%
Return on Equity (%)	24.00%	18.60%	21.60%	21.90%	19.00%

Data Source: Equitymaster

Looking ahead, RITES aspires for double-digit bottom-line growth. The company is witnessing encouraging growth in the quality assurance sector, particularly among non-Indian Railway clients.

It is actively pursuing international expansion, targeting new markets with different railway gauges, particularly those employing cape gauge.

To know more about the company, check out its financial factsheet and latest quarterly results.

#2 ITD Cementation India

Next on our list is ITD Cementation.

ITD Cementation, a prominent infrastructure player in the construction and engineering domain, is known for its large-scale project execution in sectors such as transportation, power, and industrial infrastructure.

The company, a subsidiary of Thailand-based Italian-Thai Development Public Company Limited, has carved a niche in handling complex infrastructure projects.

As the government ramps up infrastructure spending, especially in sectors like transportation and urban development, ITD Cementation stands to benefit significantly.

The company's expertise in specialised infrastructure projects, particularly in marine, metro, and urban sectors, positions it well to capitalise on India's rising investments in ports, metro networks, and urban development.

With an order book valued at Rs 185.4 billion (bn), the company is heavily focused on marine and urban infrastructure projects. Moreover, its order book is diversified across governments, PSUs, and private sector clients, contributing 49%, 18%, and 33% respectively.

ITD Cementation has a strong presence in 13 Indian states and one union territory. It's executing projects overseas in Sri Lanka and Bangladesh.

The company secured fresh orders worth Rs 70 bn in FY24, including a Rs 12 bn marine terminal project in Gujarat-an area known for better margins-and a Rs 9 bn metro station project in Mumbai.

ITD Cementation Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	-9.80%	-4.70%	39.60%	33.70%	51.60%
Operating Profit Margin (%)	12.00%	8.00%	8.00%	8.00%	10.00%
Net Profit Margin (%)	1.50%	0.60%	1.80%	2.50%	3.60%
Return on Capital Employed(%)	17.80%	13.70%	19.30%	24.80%	36.90%
Return on Equity (%)	4.20%	1.50%	6.10%	10.10%	18.40%

Data Source: Equitymaster

Between 2020 and 2024, ITD Cementation registered a solid 5-year CAGR of 19.5% in revenue and 27.4% in net profit, underscoring the company's consistent growth trajectory. The company's financials are robust, with an average RoCE of 22.5% and RoE of 8%.

To know more about the company, check out its financial factsheet and latest quarterly results.

#3 Ahluwalia Contracts

Third on our list is Ahluwalia Contracts.

Ahluwalia Contracts is a leading player in the construction industry, specializing in civil engineering and infrastructure projects across various sectors, including residential, commercial and institutional buildings. Its impressive clientele includes central and state governments, PSUs, renowned business houses, and real estate developers.

Given the government's focus on infrastructure development in the coming budget, Ahluwalia Contracts is expected to benefit from increased project tenders, particularly in the urban development and affordable housing sectors, making it a stock to watch for pre-budget gains.

With an order book valued at approximately Rs 214.4 bn, the company's growth is primarily fuelled by its expertise in building construction projects.

Key wins in 2024 include a Rs 7 bn contract for a commercial complex in Mumbai and a Rs 5 bn residential development in Bangalore.

Additionally, Ahluwalia Contracts has made strides in the data center space, securing orders from marquee clients such as Adani and Indian Financial Technologies.

Ahluwalia Contracts Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	7.40%	5.20%	35.80%	5.40%	35.80%
Operating Profit Margin (%)	8.00%	8.00%	10.00%	11.00%	10.00%
Net Profit Margin (%)	3.40%	3.90%	5.80%	6.80%	9.70%
Return on Capital Employed(%)	16.40%	16.60%	24.40%	24.00%	34.50%
Return on Equity (%)	8.00%	8.80%	15.00%	15.80%	23.40%

Data Source: Equitymaster

Between 2020 and 2024, Ahluwalia Contracts achieved a solid CAGR of 12.6% in revenue and 10.2% in net profit, reflecting a steady growth trajectory.

The company's financials are strong, with an average Return on Capital Employed (RoCE) of 17.9% and Return on Equity (RoE) of 14.5%.

To know more about the company, check out its financial factsheet and latest quarterly results.

#4 VA Tech Wabag

Fourth on our list VA Tech Wabag.

VA Tech Wabag is a leading player in the water and wastewater treatment sector.

The company's expertise in designing and implementing infrastructure for water treatment, desalination plants and sewage treatment positions it to benefit from the government's growing focus on water management and sustainability.

From desalination plants to wastewater recycling, the company caters to both municipal and industrial clients, with a strong foothold in India and key international markets such as the Middle East, Africa, and Southeast Asia.

Recent contract wins, including a significant sewage treatment project in Chennai, have reinforced its position in the domestic market.

Additionally, the company is actively expanding its presence in the growing desalination sector, a space gaining traction amid rising water scarcity concerns.

VA Tech Wabag Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	-8.10%	10.80%	5.10%	-0.60%	-3.50%
Operating Profit Margin (%)	8.00%	8.00%	8.00%	11.00%	13.00%
Net Profit Margin (%)	3.30%	3.60%	4.40%	0.40%	8.80%
Return on Capital Employed(%)	20.10%	14.30%	15.70%	5.10%	20.00%
Return on Equity (%)	7.10%	7.20%	8.60%	0.70%	13.80%

Data Source: Equitymaster

Between 2020 and 2024, VA Tech Wabag recorded a CAGR of 0.5% in revenue and 22.9% in net profit. Its average RoCE and RoE were 7.5%and 15%, respectively.

To know more about the company, check out its financial factsheet and latest quarterly results.

#5 Action Construction Equipment

Last on the list is Action Construction Equipment (ACE).

ACE is India's largest manufacturer of pick & carry cranes and a key player in heavy machinery, catering to construction, infrastructure, logistics and agriculture sectors.

The company, established in 1995, is renowned for its innovative products, including the world's first fully electric mobile crane and 180-ton crawler cranes.

ACE is expanding its global footprint with international contracts, including a major assembly plant in Ghana, while strengthening its defence presence with custom-built forklifts for the Indian armed forces. A potential Rs 4 bn defence order could further boost this segment.

In FY24, cranes, material handling and construction equipment contributed 92% of revenue, supported by ongoing capacity expansion to raise revenue potential from Rs 45 bn to over Rs 51 bn by FY25.

The company expects 15% growth in its core segments, driven by strong demand from infrastructure development.

As the government ramps up infrastructure spending, ACE is well-positioned to capitalise on rising demand, solidifying its role in India's infrastructure growth story.

Action Construction Equipment Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	-13.90%	6.10%	32.80%	32.50%	34.90%
Operating Profit Margin (%)	8.00%	10.00%	9.00%	10.00%	14.00%
Net Profit Margin (%)	4.50%	6.50%	6.40%	8.00%	11.30%
Return on Capital Employed(%)	17.50%	22.10%	19.50%	26.60%	37.20%
Return on Equity (%)	11.90%	15.20%	13.90%	18.80%	26.70%

Data Source: Equitymaster

Between 2020 and 2024, Action Construction Equipment has recorded a CAGR of 16.8% in revenue and 42.3% in net profit, demonstrating solid growth. The company's financial strength is reflected in an average RoCE of 24.6% and RoE of 17.3%.

To know more about the company, check out its financial factsheet and latest quarterly results.

Snapshot of Infrastructure Stocks on Equitymaster's Stock Screener

Here's a table showing infrastructure stocks along with some important parameters -

Conclusion

As India gears up for its next phase of economic growth, infrastructure remains the backbone of this transformation. The five companies highlighted above, with robust order books and strategic project wins, are poised to ride the wave of government spending and sectoral momentum.

While a strong order book signals potential revenue and profit growth, it's crucial to focus on execution capabilities and profitability. After all, it's not just about winning contracts but delivering them efficiently and sustainably.

With the Union Budget on the horizon, these stocks could emerge as key beneficiaries of increased infrastructure spending.

However, as with any investment, maintaining a balanced perspective and keeping an eye on execution remains essential for long-term gains.

Investors should evaluate these companies fundamentals, corporate governance, and valuations of the stocks as key factors when conducting due diligence before making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...