What are experts betting on in the infra space?

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What are experts betting on in the infra space?

In an interview with CNBC-TV18, Shailesh Kanani, Research Analyst, Angel Broking and Naveen Jain of Indiabulls Securities, speak about the infrastructure sector and give their outlook going forward.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

Q: Would you prefer those who are constructing or would you prefer those who own the assets, the developers?

Kanani: I would more go with contracts, constructors because the valuation is one of the things. IRB we were bullish on, but right now we are neutral on the asset owners. On the conviction list, I think IVRCL Infra would be our top pick followed by Nagarjuna Construction and Patel Engineering.

Our saying is based on the valuation within sector, their order book position, their funding is in place and the execution track record. So that's the reason we are indicating these three top picks.

Q: Hindustan Construction , that's been one volatile stock, of course the problem here was a bit different because of the whole environment issue there are some question marks now on Lavasa and the kind of valuations that were build in for this particular stock. Do you track that and would you have any view on that?

Kanani: Hindsutan Constructions has never been our top pick as such because we believe that it's more of play on the real estate that is 50-60% of the valuations are coming from Lavasa. So, our fair value for the stock is in the range of Rs 65. The stock was trading around Rs 70 few days back and because of this announcement that stock has been battered down. But still we maintain that it would more be a play on real estate and investors believing in Lavasa story would be the kind of an investors in the stock. So, our view is neutral on HCC with a fair value of around Rs 66.

Q: When we speak of infrastructure, the high visibility is for roads, so one would have thought that IRB would be on your list, in your watch list likewise something like IL&FS Transportation Network, a related company?

Jain: We have an 'outperform' rating on IL&FS Transportation Network. I think there is a huge amount of activity that we are going to see in the road space in terms of projects that are going to come up. IL&FS is best placed to scale up and make maximum use of this opportunity. So we have 'outperform' rating on IL&FS Transportation.

Q: IRB is at Rs 285, not at this price?

Jain: No, primarily because of valuation new do not prefer IRB at this moment. We have a target price of Rs 262 on IRB. So, it's on the expensive side right now.