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Healthy performance expected…

We expect strong revenue growth for construction companies on a YoY basis amid a benign base, driven by improved labour availability and despite a monsoon led seasonally muted quarter. For real estate companies, sales volume is likely to recover sharply driven by favourable macro drivers, demand and new launches (in some cases). Going ahead, festive season led new launches and its demand momentum will be key monitorables for residential real estate.

Sales volumes rebound; festive season to see launches

We anticipate residential sales momentum will recover sharply, driven by triggers such as pent up demand, benign interest rates and launches (for some developers). We bake in ~236%, ~50% YoY growth in sales volumes of Brigade, Oberoi Realty, respectively. On the leasing front, new commercial leasing activity is likely to recover with economic reopening, albeit still slower due to partial work from home. The hospitality and retail segment is likely to show a smart recovery QoQ driven by economic reopening post the second wave in Q2.

For Kajaria, we expect tiles sales volumes to witness strong growth of ~15% YoY. We expect overall revenues to grow ~22% YoY to | 869.7 crore, also aided by 6% realisation growth on account of price hikes taken. We expect EBITDA margins of 18%, down 220 bps YoY due to higher gas prices. Overall, we expect the bottomline at | 98.2 crore, (up ~10% YoY).

Order inflows, execution to improve

Order inflows across the construction universe are likely to improve with a pick-up in the overall ordering trend. NCC received order inflows worth | 3000 crore during the quarter, across water, electrical and building division. Ashoka Buildcon won orders worth | 3067 crore, during the quarter spread across transmission, housing and road EPC. HG Infra, on the other hand, secured one road EPC and one HAM project totalling | 1692 crore. KNR Construction announced orders worth | 313 crore while PNC Infratech did not announce any new orders during the quarter.

On the execution front, we expect construction companies to witness robust growth on a YoY basis on a benign base (our coverage topline was down ~4.5% in Q2FY21) and execution pick-up with labour availability. On an overall basis, we expect our road & construction universe to post revenue growth of 29.7% YoY to | 5890 crore. The reported EBITDA margin of our universe is expected to contract 200 bps YoY to 13.1% as the base quarter had some one-offs. Overall, we expect our universe PAT to grow 26.7% YoY to | 399 crore, driven by robust topline growth and lower interest costs.

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