Since stock market is highly volatile, it is of utmost importance for the investors to first track the stocks and then, when the targeted levels are reached, make an investment. However, which sector to invest in is the biggest question which pops up in the minds of the investors. The biggest advantage of investing in the top real estate stocks is that they get an opportunity to invest in the companies which are in the business of high-quality infrastructure assets (including airports, seaports, etc.). Since demand of such companies is quite sustainable in the long-term as compared to other industries, investing in top real estate stocks makes an investor eligible for stable cash flow and capital growth.
Experts believe that India’s infrastructure sector market size should compound at ~9.57% from US$186.24 billion in 2023 to US$294.12 billion by 2028. Given increased importance of infrastructure sector for the development of India, reports related to cost overruns and delays established disputes over recent years. However, construction industry and infrastructure projects focused on economic revival after COVID-19. Expectations were canalized through National Infrastructure Pipeline (NIP), and this has been categorised as a biggest government initiative in recent years. Backbone of Indian economy, the infrastructure sector, is very critical for nation’s overall development. Other industry sub-segments consist of telephony, power, roads, etc. India is required to enhance its infrastructure to touch 2025 economic growth target of US$5 trillion.
India’s economy benefitted significantly from infrastructure sector. Infrastructure sector spans across many industries such as construction, urban and rural development, real estate, etc. As per economic survey 2021–22, India’s road network grew significantly in present fiscal year in comparison to prior ones. In CY21, 13,327 km of roads were established in comparison to 10,237 km in 2019–20, exhibiting increase of 30.2% in comparison to previous year. 3,824 km of new roads were established in CY22 (up till September).
With this in mind, let us now have a look at some of the top real estate stocks which investors should track.
1. Generic Engineering Construction and Projects Ltd.
It is a Mumbai-based construction company which constructs residential, industrial, commercial, and institutional buildings and has presence in Navi Mumbai and Mumbai Metropolitan Region (MMR).
Total revenue of the company came in at INR27,391.22 lakhs during FY23 against INR26,255.35 lakhs in FY22. It saw net profit of INR1,531.12 lakhs during FY23 as against a profit of INR1,392.22 lakhs in the previous year after tax.
FY23 was a normal year from an operating environment point of view and, therefore, this should provide an opportunity for Indian economy to be world leader. There continues to be consolidation of this industry with over 50% of incremental new supply now coming from renowned and branded developers. This sort of consolidation should continue even going forward irrespective of the fact of higher interest rates. In the new normal, branded developers have adopted new ways of doing business. They are now rightly focused on end-user customer demand and they have strong focus on innovation and digital transformation.
Developers who are financially strong and have strong track record of execution are expected to benefit from cyclical upturn. FY24 should be another rewarding year and this industry is expected to capture growth opportunities moving forward.
2. Sonu Infratech Ltd
Sonu Infratech Limited has been categorised as a gateway for engineering excellence in civil construction, structural painting, mechanical scaffolding, etc.
During FY23, the company’s revenue from operations came in at INR6,405.16 lakhs in comparison to INR5,317.88 lakhs during FY22. Revenue from operations of the company grew by 20.45% in FY23 against FY22. Other income of the company was INR17.17 lakhs in FY23 against INR71.08 lakhs in previous financial year of FY22.
The company has a lot of opportunities for future growth. The strengths of the company lie in its track record of completing projects efficiently and, that too, in stipulated period of time. It is of utmost importance that in construction industry projects are completed according to the contracted schedule. It has strong track record of timely execution of projects, minimizing cost overruns. Apart from this, it eliminates possibilities regarding penalties and liquidated damages. This helps in earning repeat orders from the clients.
Plans are there to take advantage of growing opportunities in infrastructure development through utilisation of expertise in civil construction, mechanical scaffolding, plant maintenance business, etc.
3. Hindustan Construction Company
The company is a pioneer in India’s infrastructure industry as it has executed landmark projects which defined India’s progress since 1926. It has been able to maintain its legacy of innovation in engineering and construction and has built world-class infrastructure, thereby creating new opportunities.
The company has released 1Q24 results, and it saw turnover of INR1,230.9 crore against INR972.7 crore in 1Q23. Net profit of the company came in at INR18.9 crore in 1Q24 in comparison to loss of INR150.8 crore in 1Q23. EBITDA margins of the company was 12.6% against 10.4% in 1Q23.
Sustainable growth and higher cash flow were achieved as a result of the implementation of several project streamlining initiatives and constant emphasis. The company saw revenue growth of ~26.5% in comparison to the same quarter of last year. During 1Q24, the company launched final segment of Anji Khad Railway Bridge Project in J&K.
The company closed its sale of Baharampore-Farakka Highways Limited to Cube Highways and Infrastructure V Pte Ltd. This was done at an enterprise valuation of INR1,323 crores, including SPV debt of Rs.646 crores. The company will be received total of INR941 crores, including upfront payment of INR677 crores and INR264 crore is payable by 2Q24 and 1Q25 in 2 different tranches, contingent on the traffic projections. As part of the agreement with Cube, the company is entitled to a revenue share from BFHL over concession period.
To sum up
Even if there is a minor correction in the mentioned top real estate stocks, investors should make an investment. Investing in some of the top real estate stocks should mean that their capital is expected to grow with the growth of Indian economy. Real estate sector has been categorised as 2nd highest employment generator, after agriculture sector. Expectations are that this sector will incur more NRI investment, both in short and long term.
Read Also:
6 Comments