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Roads: Expect awarding to pick up in medium term

ICICIdirect Research 07 Apr 2025 DISCLAIMER

The government has set the aim of building 10,000 km of highways and raising Rs 30,000 crore from monetisation of road assets in FY26. The road construction target for FY26 is lower than 10,421 Km and the monetisation target is also lower than Rs 39,000 crore expected for FY25.  Lower construction target for the second consecutive year, is owing to muted awarding during the last 2 years.

We highlight that at present, 636 National Highways projects of four, six or eight lanes, spanning 16,422 km length, are under construction at an estimated cost of ₹6.35 lakh crore. On a medium term, the government will convert 25,000 km of two-lane national highways with vehicle density higher than 10,000 PCUs (passenger car units) into four lanes at an investment of ~₹10 lakh crore in the next two years.

This will provide massive ordering opportunity for the road focussed players. Our top picks include KNR Constructions (TP 280) and HG Infra (₹ 1530). The stocks have underperformed given the weak ordering during the last 2 years, thus any ramp up in the ordering will be a key catalyst for earnings as well as rerating tailwind. Lower interest rates, going ahead, also bodes well for Infrastructure sector as whole.

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