Earnings will drive construction firms' valuations: Crisil

Mumbai : 06 Sep 11 | 12:03 AM:Shares of construction companies were the toast of the stock market when the going was good. The recent past, however, has seen these counters losing flavour with investors across categories. In its latest report, Crisil Research has said earnings, and not order book, will drive the valuations of Indian construction companies.

“Though most companies have a healthy order book, valuations have taken a beating due to muted earnings growth, mainly due to execution hurdles, hardening interest rates and stretched working capital cycle," says Crisil in a report released on Monday.

Crisil Research has coverage on ARSS Infrastructure Projects, C&C Construction Ltd, Era Infra Engineering, Marg and MBL Infrastructure. Of these, ARSS, Marg and MBL have a valuation grade of 5/5, indicating a strong upside (more than 25 per cent from current market price); C&C and Era have a valuation grade of 4/5, indicating an upside (10-25 per cent from current market price).