Stocks to buy: 3 high-conviction road infra shares with strong upside potential 

The road infrastructure sector, while facing near-term execution challenges, looks set for a strong revival in FY26, supported by government-led capex, improving project awarding activity, and diversification into non-road segments.

Axis Securities said valuations of a select road infra stocks are attractive, and that a robust pipeline of opportunities is emerging, as it suggested three stocks to capitalise on the sector’s long-term growth trajectory. They are HG Infra Engineering Ltd, Kalpataru Projects International Ltd and J Kumar Infraprojects Ltd.

"With government capex rising, project awarding gaining momentum, and execution challenges expected to ease in FY26, now is the ideal time to position for long-term gains in the Infra-Road & Other sectors. Our top conviction ideas offer a compelling combination of earnings growth, valuation comfort, and exposure to upcoming infrastructure developments, making them attractive investment opportunities at current levels," Axis Securities said.

The brokerage suggested target prices of Rs 1,720 on HG Infra Engineering Ltd, Rs 1,350 on Kalpataru Projects International Ltd and Rs 940 on J Kumar Infraprojects Ltd.

The brokerage believes that investors should closely track the pace of raw material price movements, timely receipt of ADs, order inflow trends, and execution progress. Companies with strong balance sheets, robust order books, and diversified revenue streams are best positioned to navigate near-term headwinds and benefit from long-term sector growth, it said.

Axis Securities said most road construction projects are expected to be awarded under EPC and HAM models, positioning infrastructure companies as prime beneficiaries of the government’s capex push. With a healthy order pipeline, improved awarding activity, and diversification into non-road infra segments, the sector is poised for strong growth in the medium to long term, it said.

The FY26 Union Budget increased infrastructure capex to Rs 11.2 lakh crore from Rs 10.20 lakh crore in FY25. Additionally, the government has proposed an outlay of Rs 1.5 lakh crore in 50-year interest-free loans for state-led infra projects, ensuring sustained investments in the sector. New initiatives such as the National Geospatial Mission and Digital Network Platform will improve land governance and streamline trade processes, further accelerating infrastructure development, Axis Securities said.

On Kalpataru Projects, Axis Securities said the company is well-positioned for steady revenue growth, projecting a 16 per cent CAGR from FY24 to FY27.
It said the temporary margin pressures faced by the company is due to external factors, but the strong order book composition and efficiency-driven initiatives should support margin recovery. It projected growth of 19 per cent and 31 per cent in Ebitda and PAT, compounded annually, over FY24-27.

"The sluggish performance in the water business has weighed on overall growth, with Rs 1,000 crore infused into the segment during 9MFY25. Slow collections from JJM projects have been a key challenge, but the recent realisation of over Rs 240 crore from January 2025 onward, along with an anticipated Rs 500-700 crore collection in Q4FY25 or Q1FY26, signals improving cash flow," Axis Securities said.

The Union Budget’s commitment to 100% tap water coverage and increased funding for FY25-26 should drive faster collections and execution, supporting overall business
momentum, it said.

On J Kumar Infraprojects, Axis Securities said the company is L1 in projects worth Rs 5,000 crore, including two projects for the Maharashtra Expressway and one coastal road project for CIDCO in Mumbai. It said a healthy and robust order book provides revenue visibility for the next 3-4 years. The brokerage expects the company to report a revenue CAGR of 17 per cent over FY24-FY26.

Meanwhile, HG Infra Engineering is anticipating an order inflow of Rs 11,000-12,000 crore in FY25, with projects worth around Rs 8,200 crore already secured in 9MFY25. The management expects 35-40 per cent of the order book to come from non-road projects over the next 2-3 years. Additionally, the company aims to secure Rs 10,000-12,000 crore in new orders in FY26.

"As of December 31, 2024, the company's total order book stood at Rs 15,080 crore, equivalent to 3 times FY24 revenue. A significant portion, 94 per cent, of these projects is attributed to the Government of India, with the remaining 6 per cent from the private sector, ensuring strong revenue visibility for the next 2-3 years," Axis Securities said.