Construction stocks on weaker ground

Mumbai : Due to high interest rates and decline in order inflows, shares of majors likely to remain under pressure. Contrary to expectations for the June quarter, major construction companies — IVRCL, NCC, Hindustan Construction Company, Simplex Infrastructures and Gammon India — have reported only single-digit growth in net sales. While their performance at the operating profit level wasn’t that bad, with three of them witnessing a marginal rise in operating margins (OPMs), higher interest costs saw net profit margins (NPMs) tank for most.

The share prices of these companies have corrected by an average of 60 per cent over the past year, as there has not been any improvement in financial performance, consequent to sluggish order inflows, execution hurdles resulting in a deteriorating working capital cycle and decline in margins on high costs.