Finding Value in Infrastructure

Fifty-six out of 124 capital goods firms reported negative sales growth in the last 12 months.
Ten out of 27 electrical companies reported negative operating profit growth in the same period.
The average debt that construction sector carries on its books is two times its equity.
The average ROCE for the power generation sector stands at 6.5 per cent.

The infrastructure sector is a landmine field. There is not a single segment, be it capital goods, engineering, power, construction or realty, that is out of the woods yet. Navigate through negative top line growth, operating losses, margin declines, debt on the books and you'll still get stumped by valuations.

We set about in search of value in the infra space. So elusive a venture this has been! We set out to bring you ten companies that provide value at current prices. We ended up with only five.

Does that mean there are no other quality stocks in this space? Definitely not, but value simply disappears for any company that checks all the boxes - a decent revenue and EPS growth, little to nil debt and high returns on capital. You just won't find any bargain valuations in them.

Our selection of five infrastructure companies brings you some of the highest quality companies that still offer some value.

1. AIA Engineering
2. Alstom India
3. Cera Sanitaryware
4. Finolex Cables
5. SJVN

Watch out this space for coverage of the other companies.