Stocks have taken a terrible beating in the last month and we feel that two public sector undertakings, IRCON International and Engineers India, having robust businesses and financials, should give a decent appreciation over the next one year on the back of government spending. IRCON International is an integrated engineering and construction company specialising in major infrastructure projects including railways, highways, flyovers, bridges, tunnels and development of industrial areas. More than 95% of the company’s business is from railway construction, and proposed investment in key segments such as new lines, gauge conversion, doubling, track renewals and electrification should account for a fantastic order book in the next three years. Currently, the order book of IRCON International stands at over Rs 23,000 crore. The IRCON International stock was offered to the public in September 2018 at Rs 475 per share. It has had a tepid listing and currently quotes at Rs 385 on the exchanges. Analysts are expecting the stock price to appreciate by 20% in the next one year, and so it is a good fundamental buy for sure.
Engineers India Ltd is a Navratna public sector undertaking of Government of India under the Ministry of Petroleum and Natural Gas set up in 1965 to provide engineering and related technical services for petroleum refineries and other industrial projects. Today, EIL is a global engineering consultancy and EPC company at par with other similar companies around the world. Over the years, it has diversified into infrastructure, water and waste management, solar and nuclear power and the fertiliser sectors. Engineers India is a total solutions engineering consultancy company, providing design, engineering procurement, construction and integrated project management services from concept to commissioning, with high quality and safety standards. The company’s technological excellence is driven by around 2,400 engineers and professionals providing specialist professional services for their projects. The government is spending money on capex and Engineers India is a direct beneficiary by getting most of the prized contracts. Public sector undertakings are expected to pump in over Rs 1 lakh crore for their capital expenditure plans, with Indian Oil Corporation lining up Rs 22,000 crore for the current fiscal. Similarly, HPCL has also planned to invest Rs 75,000 crore over the next five years to expand its refining capacity, pipelines and LNG terminals. It has also bagged a project execution order from HPCL Rajasthan refinery to build a greenfield petroleum chemical complex in Barmer, Rajasthan. These huge capex plans by oil public sector undertakings should boost the order inflow, revenue and profit of Engineers India Ltd to a large extent for the current financial year. Most fund managers and analysts are betting on Engineers India stock currently quoting at Rs 121 on the bourses to appreciate by at least 20% over the next one year on the back of better results on fundamental basis.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.