Rebuilding construction sector! Still a long way

September 16, 2006

Construction stocks saw a sharp correction from their May peak levels and some are yet to see recovery in their stocks. The concerns of shrinking margins affecting the profitability seem to overshadow the growth momentum witnessed by the construction companies. The stocks had a steep fall and have a long way to go to re-attain their peak level.

On the financial performance front, the topline of construction majors like HCC, Simplex, IVRCL and Gammon have grown significantly but the bottomline has not shown a similar rise. The companies have also seen the OPM and their NPM under pressure.

IVRCL, which derives more than 60% of its revenues from the water segment, reported a 44% yoy growth in topline and 32% growth in net profit in Q1FY07 on YoY basis.

HCC, a diversified player registered a growth of 24.4% in net sales at Rs 580.62 crore and its net profit was at Rs 25.12 crore registering a growth of 10.9% on YoY basis.

Gammon registered 46% yoy growth in topline and 21% growth in net profit in Q1FY07 on YoY basis. Simplex registered 13.1% growth in net sales and 10.3% de-growth in net profit in Q1FY07 on YoY basis.

However, companies like Patel Engineering and Nagarjuna Construction have seen a growth in the topline as well as bottomline.