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HDFC Securities: Infrastructure Sector Outlook - On The Road To Re-Rating

Despite concerns around Covid-19, for the Infrastructure sector, this period has been mostly Reboot-2.0, HDFC Securities says.

Workers prepare bracing while working at the National Highway 24 road widening and bypass project near the Indirapuram township in Ghaziabad, Uttar Pradesh, India (Photographer T. Narayan/Bloomberg)
Workers prepare bracing while working at the National Highway 24 road widening and bypass project near the Indirapuram township in Ghaziabad, Uttar Pradesh, India (Photographer T. Narayan/Bloomberg)

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HDFC Securities Report

Despite concerns around Covid-19, for the Infrastructure sector, this period has been mostly Reboot-2.0.

1. National Highways Authority of India (NHAI) awarding (FYTD21) started with a bang (about to surpass FY20);

2. the largest client NHAI eased working capital for developers;

3. banks are using surplus liquidity and low interest rates to increase allocation to the sector;

4. concerns on NHAI balance sheet seem to be abating;

5. increase in fuel cess to add Rs 1 trillion to fund infra annually (total Rs 2.3 trillion);

6. asset monetisation to lead to balance sheet deleveraging; and

7. Atmanirbhar and national infrastructure pipeline programs' on-ground execution lends visibility to longer duration Indian Infra buildout.

We remain optimistic and see sector rerating at a 4-5 times book-to-bill and sub 6/4.6 times price to earning for FY22/23E when peak ordering is still some time away.

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HDFC Securities Infrastructure On the road to rerating.pdf

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