· Government reforms to aid both execution and profitability of infra companies
§ Reforms like SEB restructuring etc., are likely to boost investment activity in the country
§ Investment growth, which had capitulated due to policy paralysis, likely to bounce back
· Improvement in economic growth to act as a catalyst for volume surge
§ With GDP growth expected to improve, higher traffic and better volumes will boost asset valuations
· Interest rate easing to result in multi-pronged benefits
§ With interest rates set to decline, infra companies with high leverage levels will see sharp jump in profitability; lower interest rates to boost capex cycle and improve working capital cycle
§ Along with earnings upgrades, multiple re-rating will further drive stock performance
· Finally, return of risk appetite to drive stock returns
§ Higher liquidity and incremental flows in equity markets to result in outperformance of cyclicals; we believe it is time to increase exposure to ‘high-beta’stocks
· Conclusion: Time to act
§ We present select stocks with distinct investments profile:
§ Multiple re-rating: JP Associates, GMR Infra, Adani Ports, Nagarjuna Construction, Voltas, KEC
§ High risk, high-return: Lanco Infra, IRB Infra, Adani Enterprises, Crompton Greaves, Jyoti Structures
Regards,
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