In last few weeks, market has seen further continuing selling pressure from FIIs. In this fall, many sectors have loosen their great value and market capitalisation. But one specific sector which has not seen any great sell-off is of Infrastructure, especially those Companies which are engaged in Road construction activity.
Companies like Ashoka Buildcon, Dilip Buildcon etc have won and had got many orders from NHAI in recent time amounting in Thousand crores. However, this is not the end of this supply of great orders. In next 5 years, Government has planned to invest more than 5 lakh crore in Road Construction under BharatMala Project. This project was announced nearly at the time of PSU Banks Recapitalization which had resulted in a great burst in all of the PSU Banks. But during the same time, these road Construction stocks had not delivered any great return as same as PSU banks.
However, till now after recapitalization and Bharat Mala project announcement, condition is that many PSU banks have now corrected almost 50 percent from their peak prices. But still, many of road companies stocks are trading at their same price as was in 3–4 months ago.
At current levels, one favorable thing for investing in Such Road companies stocks is that you are investing in highest growth potential stocks. We all know that government will distribute over Rs 5 lakh crore projects in next few years. So, those which are specialist and have great experience in road construction will definitely get some big orders. This will in result improve their order books and will also give a path to expand their business. Also, this will help them to grow at a much faster rate as compare to earlier time. And therefore, this will positively affect their stock prices.
However, their is no fixed time or rate of how and when we will see the real impact of order giving by NHAI to infrastructure companies. But yes, it is true that this is the principal of stock market that if stock is having much attractive EPS and PE level than others, it will generally see some good buying.
So, overall I would say that at present, it could be a great opportunity or you can say a great option to invest your money in Road construction companies. Especially in those having great experience, respect from market investors, and have clean balance sheet.
From all the Road construction stocks, my pick is Ashoka Buildcon which is currently trading around Rs 230 with a PE ratio of 20 and market capital of around Rs 4,500 crore. However, as per your comfortable level, you can choose any other stock having majority of revenue from Road construction.
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