Fundamentally Strong Water Infrastructure Stocks: The Indian stock market has faced significant volatility in recent months, with the water infrastructure sector in particular being hit hard. Some stocks in the region have fallen by up to 50% from recent highs, forcing many investors to reassess their investments. While such sharp declines often indicate underlying problems, they can also present unique opportunities for investors with a long-term view.
This downturn in water infrastructure stocks raises important questions: are these stocks fundamentally weak, or are they simply victims of broader market conditions? In this discussion, we will analyze the reasons for the sharp decline in water infrastructure stocks, examine market dynamics, and assess whether these companies could present opportunities for investors interested in buying at a discount. Taking a closer look at their financials, business models, and recovery potential, we will assess whether the sector is poised to rebound as the market stabilizes.
Fundamentally Strong Water Infrastructure Stocks
Here we will talk about some fundamentally strong water infrastructure stocks that can give you three to four times returns in the long term.
1. Enviro Infra Engineers
Established in 2009, Enviro Infra Engineers is a company specializing in the design, construction, operation and maintenance of water and wastewater treatment plants (WWTPs) and water supply projects (WSSPs). It primarily works with government agencies and entities through EPC (Engineering, Procurement and Construction) and HAM (Hybrid Annuity Model) contracts. The company has successfully implemented sewage, general waste and water treatment projects in various states such as Gujarat, Rajasthan, Punjab, Haryana, Uttar Pradesh and Madhya Pradesh.
Currently, Enviro Infra Engineers has a market capitalization of ₹4,615 crore, and its stock is currently trading at ₹263. Its highest price was ₹392, which is 40 percent higher than the current price.
The company has a price-to-earnings ratio of 43.3, indicating its financial stability. Also, its ROCE (Return on Capital Employed) is 47.4% and ROE (Return on Equity) is 50.8%. The stock has an EPS (Earnings Per Share) of ₹7.92, indicates positive financial prospects for its shareholders.
Enviro Infra Engineers has sales of ₹729 crore and a net profit of ₹106 crore, which reflects its growing financial performance. With a 70% promoter holding, the company has stability and confidence in its management. Despite the recent market volatility, Enviro Infra Engineers’ strong fundamentals and its contribution to the water infrastructure sector could create attractive opportunities for long-term investors.
2. Kalpataru Projects
Kalpataru Power Transmission Limited (KPTL) is a global EPC (Engineering, Procurement and Construction) player, which has expanded its operations across various sectors such as power transmission and distribution, oil and gas pipelines, railways and biomass-based power generation. The company maintains a strong position through its diversified project portfolio and international presence.
Currently, Kalpataru Power Transmission has a market capitalization of ₹17,929 crore, and its stock is trading at ₹1,050, down from its high of ₹1,449. The company has a price-to-earnings ratio (P/E) of 34.8, which reflects its valuation in the market. With a book value of ₹320 and a dividend yield of 0.77%, Kalpataru Power Transmission offers a stable income opportunity for its shareholders.
The company has a ROCE (Return on Capital Employed) of 16.0% and ROE (Return on Equity) of 10.4%, indicating its efficiency and profitability. With EPS (Earnings Per Share) of ₹32.3 and promoter holding of 33.5%, Kalpataru Power Transmission maintains confidence in its strong financial structure and management.
As of 2023, the company has sales of ₹20,384 crore and net profit of ₹523 crore, highlighting its growing financial performance. Kalpataru Power Transmission’s diversified project portfolio and strong fundamentals could create attractive opportunities for long-term investors, especially in the context of growing demand in the power and infrastructure sectors.
3. Ion Exchange (India)
Ion Exchange (India) is one of the leading companies in water purification and management, providing solutions across the entire water cycle. The company offers a wide range of services from pre-treatment to process water treatment, wastewater treatment, recycling, effluent treatment, sewage treatment, packaged drinking water and seawater desalination. Its strong position in the market is a testament to its effectiveness and reliability.
Currently, Ion Exchange has a market capitalization of ₹8,045 crore, and the current stock price is ₹548. Its highest and lowest stock prices in the past were ₹768 and ₹407, respectively. The company’s stock has a P/E ratio of 37.2, a book value of ₹74.7, and a dividend yield of 0.28%. In addition, the ROCE is 27.5% and ROE is 21.1%, which is a positive outlook for investors.
The company’s net sales are ₹2,684 crore and net profit is ₹217 crore, which is a testament to its steady growth. With a promoter holding of 25.8%, the future of the company is expected to be even more promising. Ion Exchange is continuously strengthening its position in the market due to innovative technologies and advanced services in the field of water management.
4. KEC International
KEC International is a global infrastructure EPC (Engineering, Procurement, and Construction) company with a strong presence in power transmission and distribution, railways, civil infrastructure, urban development, solar energy, oil and gas pipelines and cable manufacturing. It is a flagship company of the RPG Group, which has been leading the way in sustainable infrastructure construction for a long time.
KEC International currently has a market capitalization of ₹21,666 crore, and its stock is currently priced at ₹814. Its highest and lowest stock prices in the past were ₹1,313 and ₹636, respectively. The company has a P/E ratio of 47.7, a book value of ₹190, and a dividend yield of 0.48%. In addition, the ROCE is 16.0% and ROE is 8.80%, which are important indicators for investors. The company has a price target of ₹2.00 and earnings per share (EPS) of ₹17.4, reflecting its stable earnings.
The company is in a strong position to operate with promoters holding 50.1%. The company has achieved sales of ₹21,139 crore and net profit of ₹454 crore, indicating its strong growth potential. KEC International is continuously expanding its presence in the global market through innovative projects and technological excellence in the infrastructure sector.
5. KNR Constructions
Established in 1995, KNR Constructions Limited is a Hyderabad-based infrastructure development company that provides engineering, procurement and construction (EPC) services in key sectors such as roads and highways, irrigation systems and urban water management. The company has been making significant contributions to sustainable infrastructure development for a long time and is implementing development activities through technological excellence.
The company currently has a market capitalization of ₹8,309 crore, and the current stock price is ₹295. The highest and lowest stock prices in the past were ₹415 and ₹237, respectively. KNR Constructions’ stock has a P/E ratio of 7.61, a book value of ₹148, and a dividend yield of 0.09%. In addition, the company has a ROCE of 25.7% and a ROE of 23.7%, which is a positive aspect for investors.
The company’s management remains stable with promoters holding 48.8%. The company’s sales stood at ₹5,340 crore and net profit at ₹1,222 crore, reflecting its strong growth. KNR Constructions‘ subsidiaries include KNR Agrotech Beverages, KNR Infrastructure Projects, KNR Energy, KNR Tirumala Infra Private Limited and KNR Srirangam Infra. With a combination of efficient management and advanced technology, the company has achieved significant success in the infrastructure sector and is looking to expand its operations in the future.
Conclusion
The recent decline in top water infrastructure stocks due to broader market volatility and sector-specific challenges suggests that the path to recovery may not be easy. While the sector has long-term growth potential, underlying issues such as implementation risks and regulatory hurdles should not be ignored.
As with any vulnerable sector, investors must make a realistic assessment of the associated risks before viewing these stocks as attractive investment opportunities at discounted prices. It is important to review the companies’ financial health, strategic plans, and competitive positioning in the market before investing.
Investors would be wise to remain vigilant, thoroughly analyze the companies’ business models and operational capabilities, and make investment decisions based on their risk tolerance and long-term goals.
Furthermore, corporate governance and company transparency should be considered as due diligence criteria before investing, so as to mitigate potential investment risks and ensure profitable outcomes in the long term.