Valuations of some infra stocks at 2006-2008 high levels
After the blistering rally in 2004-2008, most of these stocks started crashing in January 2008 triggered by the Global Financial Crisis (GFC). The recovery in infrastructure and construction-related stocks began only in 2020-2021 though many of them are still far away from their 2007-08 peaks.
Mumbai: The of various (engineering, procurement, and construction) stocks are now nearing the levels seen in 2006-08 - the strongest for these names - following the recent run-up in the , said .After the blistering rally in 2004-2008, most of these stocks started crashing in January 2008 triggered by the Global Financial Crisis (GFC). The recovery in infrastructure and construction-related stocks began only in 2020-2021 though many of them are still far away from their 2007-08 peaks.
The brokerage said this time, however, these companies' are far more comfortable and the are large on account of the government's focus on infrastructure. Also, these companies are in a position to monetise their Hybrid Annuity Model (HAM) infrastructure projects, it said.
According to the brokerage, the projected Price to Earnings (PE) ratio - a popular valuation measure - of some of these companies such as KNR Construction, , Power Mech Projects, and is 19-20 times - the average levels seen in 2006-08.
High PE levels on account of a sharp surge in share prices are usually seen as a warning sign by investors as elevated valuations increase the vulnerability of stocks in adverse times.
Source: Stocks-Markets-Economic Times
