Construction Companies' biz reaches pole position

Making the most out of the current scenario in the construction sector, construction companies in the past three months till June quarter clocked 15-40% growth in revenues. The players like KNR, PNC Infratech, and Dilip Buildcon have surprised the street with the pace of project execution during the quarter. With large order books for each of these companies, the next trigger the Street awaits is sustained speed of execution by successfully overtaking twin challenges including winning profitable projects, and executing them on schedule. Over the past one month, the stocks of these companies have gained 10-15%. After the latest earnings, analysts have upgraded the ratings on these stocks to "buy". According to Bloomberg consensus estimates, these companies still have potential to offer 28-31% returns in a year. A voluminous order book apart, what works in favor of these companies is their strong balance sheet. Based on FY18 financials, these companies have debt-equity ratio between one and two. Set against their sturdy order book, this appears comfortable, as execution of projects should provide the necessary cash-flows to service interest expenses and enhance earnings.