With new orders picking pace, prospects of construction companies are set to improve.

As flow of new orders in the road segment gathers pace, prospects of construction companies are likely to improve, say analysts. Yesterday, Hindustan Construction Company (HCC) announced an order worth Rs 2,860 crore from National Highway Authority of India (NHAI) to develop three contiguous road sections of 256 km on NH-34 (in West Bengal) on a design, build, finance, operate and transfer basis.

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HCC’s order book now stands at Rs 18,500 crore, which will provide good revenues for the next three-four years. Importantly, the company now has six BoT projects worth of Rs 5,500 crore, which should help increase the share of revenue from the transport segment, currently at 28 per cent.

Meanwhile, analysts are not happy with the 10.2 per cent revenue growth in the December 2009 quarter due to slow execution, mainly in Andhra Pradesh, which accounts for about 25 per cent of the company’s order book.

HCC’s net profit declined 36.3 per cent as it a booked a loss of Rs 13.49 crore, arising from its Nathpa Jhakhri joint venture. Analysts, thus, expect a marginal 12-13 per cent revenue growth and flat growth in net profit in 2009-10. However, 2010-11 is expected to be better with growth in revenue and net profit pegged at 25 per cent and 48 per cent, respectively.

This is primarily on the back of a strong order book, an expected improvement in margins and a decline in interest costs. HCC’s stock closed 1.5 per cent higher at Rs 134.15 even as the Sensex fell.

Analysts value the stock on a sum-of-the parts basis at Rs 150-160, which is about 12-20 per cent higher compared to the current market price. Further value unlocking may happen as the company lists its subsidiary Lavasa Corporation.

Additional contribution with Sunaina Vasudev and Jitendra Kumar Gupta

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