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Construction companies - recovery in execution will largely be seen from FY26

ICICIdirect Research 14 Feb 2025 DISCLAIMER

Construction companies reported weak set of numbers largely in Q3FY25, with only exception being Patel Engineering wherein topline grew by 13.6%. For Road EPC players, like PNC, KNR, the decline was sharper at ~18% and ~33%, respectively owing to lower visibility on the order book and weak execution. For other EPC players like NCC and Ahluwalia wherein revenues declined by ~2% and ~7% YoY, it was owing to specific issue of state elections and NGT ban, respectively.

Given the weak execution, most of the EPC players witnessed a sharp decline in margins ranging from 100-200 bps YoY.

We highlight that recovery of execution of these companies will largely be seen from FY26. For road players, key monitorable would be ordering which has been muted. Resumption of the same, would drive execution as well as earnings recovery. We remain selectively positive on these companies and would monitor execution improvement for the same.

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