Top Sector Ideas: Infra-Road & Others by Axis Securities Ltd
Review – Slower Execution Impacted Near-term Performance
Road infrastructure companies underperformed in Q1FY26 due to execution delays and slower Appointed Date (AD) issuances. Revenues, EBITDA, and PAT declined by 15%, 19%, and 17% YoY, as against the expectations of 7%, -25%, and -25%, respectively. A high base in the previous year—driven by arbitration gains for players like PNC Infratech and KNR Constructions—also skewed comparisons.
EBITDA margins came in at 13.4% (vs. est. 14.1%), impacted by higher input costs. Among road players, J Kumar Infraprojects delivered strong revenue growth backed by execution, while GR Infra posted PAT growth aided by InVIT dividend income. In contrast, GR Infra, PNC Infratech, and KNR faced execution challenges.
In the non-road segment, Kalpataru Projects and KEC International reported solid results on the back of margin-accretive T&D projects. Ahluwalia Contracts also saw strong revenue growth, while PSP Projects and RITES were affected by delays and weak turnkey business momentum.
Outlook – H2FY26 Execution & Awards to Accelerate
Project awarding remained sluggish (180 km awarded Apr–Jul’25), but NHAI’s robust pipeline (6,376 km worth Rs 3.4–3.45 Lc Cr) offers strong visibility. New MoRTH norms aim to curb aggressive bidding and improve order quality.
Execution has slowed to ~30 km/day (vs. 34 km/day in FY24), with a FY26 target of ~10,000 km. Awarding is expected to pick up to 8,500– 9,000 km, supporting H2 execution momentum.
HAM monetisation remains challenged by AD delays and stalled financial closures, though progress on execution and land acquisition could unlock value
Infra players are diversifying into Railways, Water, T&D, Solar, and Civil projects and are expected to contribute 25–30% of revenues and support margin stability.
Key Monitorables
* Appointed Date issuance for pending projects
* New Order Inflows, especially under EPC and HAM models
* Execution ramp-up to translate order books into revenue
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