: : : Mideast Portfolio Management Ltd - NRI Investment Consultancy : : :

Construction Companies Have Their Work Cut Out
Enjoy Healthy Order Book For Next 2-3 Years

INFRASTRUCTURE-FOCUSED construction companies are showing full order books for the current year, indicating a robust outlook for India's core sector even against the backdrop of rising commodity prices, inflation and interest rates.

Data available with ET show that the book-to-bill ratio of most construction companies has improved significantly. What's more encouraging for the sector as a whole is that the healthy order book position for most players covers 2-3 years of sales. The book-to-bill ratio indicates how long it would take for these companies to translate these order books into revenues. The book-to-bill ratio is similar to asset turnover ratio, which is used in the manufacturing sector.

The infrastructure sector in India is set to expand significantly with planned high investments. Despite higher interest rates, Construction sector projects a growth of 2.2 times in investments in key infrastructure sectors during 2007-08 to 2011-12 compared to the previous 5-year period. Interestingly, mid-sized construction firms have witnessed strong order inflows. In fact, the construction industry has seen an order flow worth more than Rs 55,000 crore in the past 2-3 years.

Constructions co's has seen strong order book and the sector has already witnessed 60-80% correction in the stock market. Construction and reality sector is considered to be safest bet in current market scenario. These sectors have already been discounted by significantly in the current market turmoil. Hence we suggest you to buy following stocks.

Lanco Infratech Ltd. :

CMP	211
52 Week High	887
52 Week low	206
Market Cap	4630 cr

The company has a huge order book in hand. Recently the company has got construction order from Andhra Pradesh worth Rs 308.98 cr. Lanco Infratech Ltd is one of India's top business conglomerates and among the fastest growing companies in India. Lanco Infratech's projects, operational and underway, are spread across India.

Nagarjuna Constructions Ltd. :

CMP	113
52 Week High	372
52 Week low	103
Market Cap	2563 cr

Similarly, Nagarjuna Construction, with an order book of Rs 12,200 crore, has a bill-to-book ratio of 2:70. Around 77% of its orders are from transportation and other sectors and 22% from water and irrigation.

HCC Ltd.:

CMP	84
52 Week High	278
52 Week low	67.80
Market Cap	2173 cr

Hindustan Construction has a book-to-bill ratio of 3:35 based on its FY08 financial performance, indicating that company has firm revenues for the next three years. It has an unexecuted order of Rs 10,100 crore. Of this, around 47% of the orders are from power and 19% in irrigation and 34% in transport and others.

IVRCL Infra Project Ltd. :

CMP	250
52 Week High	575
52 Week low	209
Market Cap	3341 cr

Hyderabad-based IVRCL Infrastructure, with an order-book of around Rs 12,400 crore, has a bill-to-book-ratio of 3:50 times, which means that the company has sufficient orders for the next three years. Of its total order book position, around 6% is in power projects, 65% from water & environmental and 29% building, transportation and others.

The construction sector is the safest bet in current market as these stocks are trading at their 52-week low and has corrected almost 70 to 80% in last 8 months. In this market scenario we suggest you to buy on every deeps.

Awaiting for you Quick Response.

Thanks and Regards,
PMS Dept.