Check out HDFC Securities' top 5 suggestions for stocks to purchase during market instability

 Check out HDFC Securities' top 5 suggestions for stocks to purchase during market instability

Investors are aggressively looking for infrastructure companies to add to their portfolios in the wake of the recent market collapse, since the firms' valuations have somewhat adjusted.

Several economists predict that the infrastructure industry will develop rapidly in the near future due to greater government spending in infrastructure.

Over the last week, there was a noticeable downturn in the Indian equities market. Market analysts argue that while valuation witnessed a fair correction, the slump still offers possibilities for investors.

Shailendra Kumar, chief investment officer of Narnolia Financial Services, says that an efficient investing strategy is to start making investments when the Nifty falls more than five percent from its top and to keep making investments over the following several months.

Many economists predict that the infrastructure industry will develop rapidly in the near future due to greater government spending in infrastructure.

According to a recent analysis by HDFC Securities Institutional Equities (HSIE), tier-1 infrastructure companies are now selling at a value that is around 11–12 times ahead of one year.

Strong order intake, the rise of new markets including water and railroads, and asset monetisation delivering returns at 1.2-1.5x the price-to-book value (P/BV) of invested equity have all contributed to the sector's re-rating. This re-rating has also been influenced by a strong balance sheet, net working capital, and the possibility of significant cash flow production.

The trading and research business expects the industry's competitive environment to stay unchanged. These are a few of HSIE's best investments in infrastructure stocks.

Ashoka Buildcon | Target price: Rs 202 | CMP: Rs 129.95

This business is well-represented in a number of important engineering, procurement, and construction (EPC) markets. Over the next three to four years, analysts anticipate further growth in construction and water EPC projects. They anticipate that asset monetisation would bring in more over Rs 3,000 crore, which might result in many value increases. The Ashok Buildcon stock has a target price of Rs 202 per share and is rated as a "buy" by the brokerage.

This year, the stock has increased by 43% already. The price-to-earnings (PE) ratio of the company is now 12—lower than the sector average of 50.55. With an annual return on equity (ROE) of 20.34, it outperforms the three-year compound annual growth rate of -19.1%. Promoters owned 54.48 percent of the business as of the third quarter of 2023.

PNC Infrastructure | Target price: Rs 452 | CMP: Rs 334.10

According to HSIE, this company's hybrid amortization mode (HAM) and asset inventory monetisation under the construct, operate, and transfer (BOT) model, which are centred on growing its order book in the railroads, are anticipated to propel value growth. With a target price of Rs 452, the brokerage has recommended buying PNC Infratech shares.

The stock has increased by almost 4% so far this year, and its current PE ratio is 13.54. Its return on equity (ROE) for the most recent fiscal year was 15.36%, falling within the typical range of 10% to 20%. On September 30, promoters had a 56.07 percent share in the business.

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KNR Constructions | Goal price: Rs 340; CMP: Rs 263.95

The firm offers prospects for regional and segmental expansion, according to HSIE analysts. The recovery of irrigation receivables and the acquisition of fresh orders outside of Southern India are positive drivers for the stock. The analysis suggests that KNR Constructions' value might rise in the near future due to the potential for expansion into non-road areas.

The stock has a 'buy' rating and a Rs. 340 price target. The stock had a 0.13 percent marginal loss in 2023 and is now trading at a 14.7 percent PE ratio. Within the typical range of 10–20%, the return on equity (ROE) for the most recent fiscal year was 16.53 percent. As of September 30, 2023, the promoter's ownership was 51.90 percent.

NCC | Target price: Rs 214 | CMP: Rs 144.45

Opportunities for NCC exist in every industry. The company's improved profitability has been fueled by increased execution, land payment realization, and cash inflows from the Sembcorp lawsuit. Strong order inflows, a strengthening balance sheet, and the possibility of profits growth are among the things that HSIE lists as justifications for investing.

Target price of Rs 214 has been set by the brokerage for this company, which is part of the Jhunjhunwala portfolio and has increased by more than 54% in 2023. The PE ratio for NCC shares is 13.78. Its ROE of less than 10 percent for the most recent fiscal year suggests that shareholder money was not used profitably. 22 percent of the firm was still owned by the promoter as of the third quarter of 2023.

HG Infra Engineering | Target price: Rs 1,251 | CMP: Rs 893.90

The business might add more orders to its portfolio for EPC projects involving railroads and waterways. Analysts anticipate that the stock's value will increase upon the monetization of the remaining Hybrid Annuity Model (HAM) assets. Infra HG stock is rated as a 'buy' by HSIE, with a target price of Rs 1,252 per share.

The stock has gained more than 38% on the National Stock Exchange (NSE) so far this year. It has a PE ratio of 10.94. Its return on equity (ROE) for the most recent fiscal year was 25.66 percent, up from more than 20 percent in the prior fiscal year, suggesting a profitable and effective use of shareholder money. Promotor's stake in the business held 74.53 percent of the corporation as of the September 2023 quarter.