L&T, KNR and PNC Infratech top bets for great infra push

Larsen & Toubro, KNR Constructions and PNC Infratech are the top bets of brokerages after the government announced that Rs 102 lakh crore of infrastructure projects will be implemented in the next five years as part of the government’s spending push in the infrastructure sector. While they see the government’s announcements as positive for infrastructure companies, they also believe that the investment targets are ambitious and there is a lack of detail on financing as well as execution of plans. Finance minister Nirmala Sitharaman said Prime Minister Narendra Modi had in his Independence Day speech spoken of investing Rs 100 lakh crore in infrastructure and said another Rs 3 lakh crore of projects are likely to be added to this pipeline. Shares of L&T, PNC Infratech, KNR Constructions and KEC International ended up 1-2% on Wednesday. Here’s what brokerages are saying on the government’s latest infrastructure push:SBICAP SECURITIESThe brokerage said it is important that measures are taken to address the various execution bottlenecks like land acquisition, ground clearances, financing of projects, and steps to incentivise banks to participate more in longterm funding of projects. While this reinforces the government’s focus and intent on infrastructure development, unless steps are taken to address these execution issues, it will be difficult to see any meaningful on-the-ground progress, it said.Positive on: Road sector, prefer PNC Infratech, HG Infra and KNR ConstructionsEDELWEISS RESEARCHThe national infrastructure pipeline will aid proper planning and faster execution of projects across the sectors, said Edelweiss. The report includes detailed planning of projects and spending across sectors for next five years and that will aid infrastructure companies and banks to plan properly for near to medium term, said Edelweiss. However, the report lacks details about financing of projects and nitty gritty around execution of these plans, the brokerage said.Positive on: Larsen & Toubro, KNR ConstructionsCENTRUM BROKINGA key takeaway from this report is the acknowledgment that the current contractual framework in Infrastructure projects is not balanced and that there is a need to create a strong regulatory framework for addressing issues around usage charges and other commercial issues including contractual disputes, said Centrum. The investment targets are clearly ambitious given past track records and with states accounting for 39% of the total outlay, their ability to generate the financial resources is uncertain, the brokerage said.Positive on: Larsen & Toubro, PNC InfratechNOMURAThe brokerage said the government’s move for the infrastructure sector is positive for stocks such as Dilip Buildcon, KEC International, KNR Construction, Larsen & Toubro and PNC Infratech. Nomura estimates that Rs 74 lakh crore worth of infrastructure investment is certainly a possibility. Nomura said private capex is likely to come below the government’s target of 22%. The brokerage expects reasonable levels of private capex only in roads, airports and renewables. Nomura does not expect a major increase in private capex in other areas of infrastructure.Positive on: Dilip Buildcon, KEC International, KNR Construction, L&T and PNC InfratechCITIGROUP GLOBAL MARKETSThe national infrastructure pipeline establishes a baseline trajectory for infra capex in India, said Citi. The brokerage added that a comprehensive monitoring and bottom-up follow-through should lead to better execution outcomes compared to the past. According to Citi, Larsen & Toubro would be the biggest beneficiary of the improvement in infra capex due to its presence in the entire spectrum of the infrastructure space. The brokerage estimates L&T’s return on equity to expand to around 16% by FY21 and also finds valuation attractive.Positive on: Larsen & Toubro

from Economic Times https://ift.tt/2QeAb0o