Policy moves boost stocks of rail, logistics, infra firms

Given the government's focus on road development, analysts remain bullish on the prospects of this sector

Shares of policy related sectors such as railways, logistics and infrastructure were in focus on Thursday, after the Cabinet Committee on Economic Affairs took a slew of decisions, including a nod for investments on rail freight lines in three states and new steps to revive the infrastructure sector a day earlier.

“These are steps in the right direction. By giving interest rate subvention, sectors such as automobiles, auto ancillary, textiles and chemicals should benefit,” said Vinay Khattar, associate director and head of research at Edelweiss.

The stocks of Titagarh Wagons, Texmaco Rail Engineering, Kalindee Rail Nirman, Stone India and Cimmco from rail-related companies rallied up to 11 per cent on the BSE exchange. So did those of KNR Constructions, MBL Infrastructure and Gayatri Projects from the construction sector.

Renewed hope of the bill on a national goods and services tax (GST) getting Rajya Sabha approval in the coming winter session of Parliament took the shares of Patel Integrated Logistics, Gati, Snowman Logistics, VRL Logistics and Allcargo Logistics three per cent to 18 per cent higher on the BSE.

With the government's focus on road development, analysts are bullish on the sector. The key beneficiaries, they say, are asset-light engineering and construction companies, with good balance sheets and select asset-owners.

“The present administration plans to scale up road capex and has launched a multi-pronged approach, by creating new programmes while enhancing funding and organisations tasked with implementing the schemes. There is a $78-billion pipeline of projects coming up for bidding and the prospects are good for road builders and asset owners,” say Bharat Parekh and Aayush Parwal of CLSA in a report on Wednesday.

Addition: “In addition to our 'buy' rated initiations on high-growth play J Kumar Infra and an 'outperform' rating on Nagarjuna, we also highlight compelling asset-owner IRB Infra. Further, non-rated KNR Construction and MBL are pure and inexpensive ideas on the construction cycle rebound. Larsen & Toubro ('buy') could also see 10 per cent of its orders come from roads. IRB and J Kumar Infra are potential double baggers on a three-year view.”

Deven Choksey, managing director, K R Choksey Shares and Securities, also believes the moves will benefit sectors and companies where work has been halted due to lack of adequate clearances, particularly in roads. However, one needs to be selective in buying infrastructure and rail-related stocks, as the dynamics will differ by company, he says.

Khattar of Edelweiss likes companies in the logistics space, and says there will be opportunities for these once GST comes in. “The roads sector, too, is playing out well. As regards railways, we expect the benefit to kick in with a lag effect, once we see more orders for wagons, etc,” he adds.