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Strong YoY growth on washout base; sequential decline amid second wave

We expect strong YoY revenue growth for construction companies driven by a depressed base, albeit a decline on a QoQ basis on account of the second wave. For real estate companies, sales volumes are expected to come off sequentially, though much better than washout base of Q1FY21.

Sales volume to decline QoQ amid second wave lockdowns

We anticipate residential sales momentum to take a breather in Q1FY22E owing to second wave. On a medium term, triggers such as pent up demand, benign interest rates, launches will continue to boost momentum, going ahead. We bake in ~62%, ~80% QoQ decline in sales volumes of Brigade, Oberoi Realty, respectively. On the leasing front, new leasing activity is likely to remain on the back burner with continued work from home scenario. The hospitality and retail segment is likely to show weakness as lockdowns will impact occupancies ad footfalls, respectively.

For Kajaria, we expect tiles sales volumes to witness strong growth of 112% YoY (albeit decline of 36% QoQ on account of second wave) on a depressed base. We expect overall revenues to grow ~121% YoY to | 613.8 crore. We expect positive EBITDA margins vs. loss in Q1FY21 but down 700 bps QoQ due to QoQ negative operating. Overall, we expect the bottomline at | 41.6 crore, (vs. loss in Q1FY21 and down 67% QoQ).

Order inflows, execution impacted by second wave

Order inflows across the construction universe were impacted owing to the second wave. PNC Infratech and KNR Construction did not announce any new orders during the quarter. NCC received order inflows worth | 2383 crore during the quarter, across building water and mining division. HG Infra secured a road EPC project in July, 2021 worth | 1393 crore, Ashoka Buildcon, on the other hand, won orders worth | 1949 crore, during the quarter spread across railways, housing and road EPC.

On the execution front, we expect construction companies to witness robust growth YoY on a washout base (our coverage topline was down ~36% in Q1FY21). On a QoQ basis, however, decline of ~29% is expected to be witnessed owing to lower efficiencies amid second wave. On an overall basis, we expect our road & construction universe to post revenue growth by 56.6% YoY to | 5378 crore. The reported EBITDA margin of our universe is expected to contract 40 bps YoY to 13% as base quarter had some one-offs. Overall, we expect our universe PAT to grow 78.1% YoY to | 356.3 crore, driven by a robust operating performance.

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