Construction Sector Q2 Results Preview - Slowdown In Awarding Activity Dampened Growth Momentum: Nirmal Bang

Nirmal Bang Report

The reduction in public capital expenditure by the Centre, states, and Central public sector enterprises in the current financial year can be attributed primarily to the effects of the general election in Q1 FY25, which resulted in a significant halt in activities.

The latest circular from the ministry instructs the National Highways Authority of India to prioritize the enhancement of current national highways and the construction of new ones, with an allocated budget of Rs. 1.4 trillion.

Furthermore, the Ministry has compiled a comprehensive state-wise list of projects scheduled for award in the current fiscal year, amounting to approximately 7,500 km. MORTH is expected to provide enhanced clarity on order awarding activities, leading to increased momentum in project awarding starting September 2024.

Nevertheless, the total project awards are anticipated to be significantly lower than those observed in FY2021-FY2023.

Companies' key focus will remain on order book diversification in non-road segments. Enhanced execution capabilities will support. The quarter is expected to observe mixed performance with revenue growth/Ebitda de-growth/PAT de-growth of ~1%/~18%/~19% YoY for our coverage universe.

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