The companies from the infrastructure sector are likely to report decent earnings for the quarter ended March 2021 driven by a sharp recovery in the pace of execution and improved efficiency. Their performances are further likely to be aided by healthy awards during the year, and commencement of work at some of these new awards, brokerage firm Anand Rathi said.
Further, positive policy measures, mostly under the Atmanirbhar Bharat scheme also appear to have provided the requisite fillip.
"Key and timely policy support and the continuing focus on tendering and awarding are well-appreciated efforts of the government. They not only helped industry participants better manage the uncertain times in FY21 but also ensued that infrastructure development remained the key focus," it said.
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The brokerage house expects infrastructure companies to report around 16 percent YoY blended revenue growth and aggregate absolute revenue from operations of around Rs 16,700 crore. Mid-double-digit YoY revenue growth would be the result also of the benign base, owing to the COVID-kicked-off disruption in March 2020.
March 2021 awarding of Rs 99,300 crore is not only higher YoY but also the best monthly figure in a good 48 months. Power & mining (44 percent), roads (34 percent) and buildings & housing (6 percent) were the key contributors. FY21 saw cumulative awards of around Rs 3.5 lakh crore, ahead of the Rs 3 lakh crore five-year annual awarding average.
It anticipates aggregate absolute operating profitability for comparable names to have risen by 23 percent on sturdier blended EBITDA margins of around 12.3 percent, up 67 bps YoY.
“Better blended margins would be a function of the greater scale, changed project mix and COVID-triggered cost controls. The margin expansion would have been better were it not for input cost pressure, Anand Rathi said in a report.
Greater operating profitability and financial leverage are expected to have taken blended adj. PAT 54 percent YoY higher. The growth would also have been due to the contained capex during the year.
Meanwhile, the recent surge in COVID-19 cases and consequent restrictions to contain the spread appear to have the potential to delay the scale-up. However, the disruption is unlikely to be of the magnitude last time owing to efforts underway.
Hence, Anand Rathi retains its long-term constructive view but still choose to be selective in the infrastructure sector. Its top picks in the sector are KNR Constructions, PNC Infratech and Ahluwalia Contracts.
Strong balance sheets, ample assurance and execution abilities are key common traits that push us to retain our positive stance, it said.
(Edited by : Jomy)
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