HDFC Securities has suggested 13 Infrastructure companies to stocks to purchase as tier-1 infrastructure companies are trading at 8.5 times at 1-year forward valuation and the recent correction presents a striking entry point for strong balance sheet players.
According to HDFC Securities, the intensity is set to reduce as books of middling players’ have full order books and see bids at a lower cost.
“Government’s intention of expanding highway programs augurs well for project awarding. With the debt embargo on NHAI (Capex to be funded by budgetary support), we expect its balance sheet to improve. Asset monetisation may further strengthen NHAI balance sheet as sovereign funds have shown strong interest in recent NHAI and private road projects,” the note stated.
According to HDFC Securities, some of the top stock picks for the infrastructure sector are GR Infra, KNR, PNC Infra, HG Infra, and NCC. Larsen & Toubro (L&T), Cummins India, and Kalpataru are its preferred picks within Capital Goods.
Tier-1 developers continue to remain cautious and seem to be choosing balance sheet overgrowth. This predicts well for long-term rerating and asset creation, the note added.
HDFC Securities’ buy tags on infra stocks include GR Infra with a target price of ₹2,266, HG Infra (TP: ₹980), KNR Constructions (TP: ₹350), PNC Infratech (TP: ₹407), NCC (TP: ₹108), Ashoka Buildcon (TP: ₹140), Ahluwalia Contracts (TP: ₹542), JMC Projects (TP: ₹142), PSP Projects (TP: ₹705), ITD Cementation (TP: ₹126), Dilip Buildcon (TP: ₹369).
The company has also made additional recommendations on IRB Infra Developers with a target price of ₹284 and J Kumar Infraprojects shares with a price target of ₹364.
“Infrastructure asset creation is a top priority of the current government, which may lead to robust ordering over the next decade,” the note added.