Parag Thakkar bullish on road, railway, defence space

Parag Thakkar of HDFC Securities told CNBC-TV18, "The growth is from a very low base because from last three years we have not seen anything in railways happening. Now with Suresh Prabhu at the helm, I think everything seems to be falling in place for example when he laid down that in five years we are going to do a capex for around Rs 8 lakh crore and he has also tied up with LIC for Rs 1.50 lakh crore, basically many things will come up in railways. Right now the earnings are very low and they can only grow from here."

"Texmaco Rail and Engineering and Kalindee Rail are going to be merged, so it will become one entity and they are debt free. Plus they have very decent capabilities in terms of all aspects of rail infrastructure. We are very bullish on the entire road, railway, defence and renewable energy space. However, we won’t go with the under-leveraged companies or companies with no debt. For example in road you will hardly find companies like KNR Constructions which is under-leveraged and working capital of just 50 days. Up till now the problem was that their order book was very small because they used to take orders on their own conditions where the margins were in excess of 14-15 percent and it was fully funded projects. Now they are going to get those kind of projects. So their order book will double in this quarter," he said.

"In defence we like Bharat Electronics and Astra Microwave because this is a clear roadmap of this government to spend heavily on infra specifically on this sector."

"Basically we would like to go with something like Simplex Infra and NCC; the infra opportunity is going to be so huge as Nitin Gadkari has also said that right now we are already building 12 km a day and he wants to take it 30 km a day in next two years. Building blocks are in place now, so these road space actually will provide huge opportunities but the only challenge right now is the working capital. Some of these companies have very high working capital days, so if that issue gets resolved then there are so many multi-bagger sitting here. But KNR Construction as I highlighted has no issue of working capital," he added.