Sep 9, 2010|
Why have infra stocks missed the recent rally?
Indian stock markets have been scaling highs in the recent past. However, infrastructure sector as a whole has remained an underperformer in this rally. And the reasons are obvious. Apart from the dismal first quarter performance (muted top line growth) execution worries due to company/project specific issues have had a negative impact on the stock prices. A look the chart below reveals the extent of underperformance of major construction companies.
Construction companies lagging the Index
However, we believe that the execution risk has already been built into the stock prices and we do not see a major downside from current levels. The execution trend is expected to pick up momentum in 2HFY11 on the back of strong order inflows. It should be noted that right now, the book to bill ratios of majority of the construction companies are at an all time high. This is mainly due to best ever order inflow recorded till date in the last quarter.
So we believe it's just a matter of execution before the benefits start being visible in the top line. Further, it is interesting to note that despite poor show in 1QFY11, the management of various companies have maintained their guidance for the full year. It is an encouraging sign to say the least. Again second half being seasonally strong period, we believe achieving or exceeding the guidance should not be difficult.
However, considering the recent price performance we believe the markets are not factoring in the benefits about to accrue in the second half of the year. Now, considering the opportunity on hand in the Indian infrastructure space, we believe the nature and extent of underperformance to the benchmark index is unjustified. On a conservative side, even if we assume the underperformance to narrow by a miniscule extent, construction companies would still leave something for the investors on the table.
More Views on News
Sorry! There are no related views on news for this company/sector.
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 4, 2017
The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407