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Execution is likely to be a mixed bag, with diversified EPC players such as KPIL and KEC International expected to deliver strong performance, while highway companies like KNR Constructions, PNC Infra and Ashoka Buildcon may face headwinds due to lower executable order backlogs. We expect KNR/PNC’s revenue to decline sharply by 24%/22% YoY while KPIL is likely to post 16% YoY revenue growth led by strong order backlog. Order inflows have been robust for diversified companies but relatively weaker for highway developers who missed their FY25 guidance. Despite this, order backlogs remain moderate to strong across most companies, with book-to-bill ratios ranging from 2x to 4x for most players. EBITDA margins are likely to improve or remain stable QoQ for most companies. Asset monetisation plans continue to remain under progress for highway developers.

* Execution to be a mixed bag: Execution is likely to be a mixed bag with diversified players like KPIL and KEC International likely to report strong performance led by strong order backlogs. However, highway companies like KNR Constructions/PNC Infratech/Ashoka Buildcon are likely to see sharp YoY revenue decline of 24%/22%/10% due to lower executable order backlogs. We expect KPIL/KEC International to post revenue growth of 16%/14% YoY in 4Q25E led by strong order backlogs.

* EBITDA margins likely to improve QoQ for most companies; debt and NWC to moderate or remain stable QoQ: EBITDA margins are likely to improve or remain stable QoQ for most companies. Margins have been impacted YoY for highway companies while remaining stable or improved for diversified companies. Among the Highways pack, we expect EBITDA margins of KNR Constructions/PNC Infra to contract by 120bps/90bps YoY due to operating deleverage and change in revenue mix (share of irrigation revenue/JJM revenue likely to fall materially for KNR Constructions/PNC Infra in 4Q25E). We expect EBITDA margins for KEC International to expand by 170bps YoY mainly driven by improved margins in the Power T&D vertical. Debt and working capital is likely to moderate or remain stable on a QoQ basis led by improved recoveries in 4Q25E.

* Tendering activity moderates while ordering activity remains strong in 4Q25: Tendering activity declined sharply by 30%/15% YoY/QoQ to INR 4.5tn in 4Q25 on high base mainly impacted by Highways and Buildings verticals. Ordering activity continued to remain strong as it grew by 62%/46% YoY/QoQ to INR 4.3tn in 4Q25 on a strong base. Among our coverage companies, order inflows for diversified names like L&T, NCC, KEC and KPIL have been strong in FY25 while being weak for highway companies (all companies missed FY25 guidance). Having said that, order backlogs remain moderate to strong for most companies (except KNR) with backlog to bill ratio in range of 2x-4x for most companies.

* Highways bid pipeline moderates; awarding picks up in Jan-25: Highways bid pipeline has moderated to INR 770bn in Apr-25 from INR 1.1tn in Mar-25. Of this, NHAI’s bid pipeline stands at INR 712bn with HAM/EPC/BOT projects accounting for 77%/8%/14% share. Highway awarding improved in Jan-25. In 10MFY25, NH awarding grew by 21% YoY to 4,204kms while construction declined by 9% YoY to 7,000kms.

* L&T 4Q25 preview – Order announcements robust; Adjusted PAT likely to grow by 14% YoY: Order announcements by L&T stood at c.INR 701bn (average of range) in 4Q25 so far. We expect L&T’s P&M (Projects and Manufacturing) order inflows to grow sharply by 61% YoY to INR 900bn. Consolidated order inflows are likely to grow sharply by 50% YoY to INR 1.08tn. We expect 8% YoY growth in P&M revenue/EBITDA with P&M margins to remain flat YoY at 9.6% (up 200bps QoQ). Consolidated revenue/EBITDA is likely to grow by 9%/17% YoY to INR 729bn/INR 85bn, with EBITDA margin at 11.6% (up 80bps YoY). We expect adjusted PAT to grow by 14% YoY to INR 49bn.

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