E&C sector on solid ground; FY24 likely to see outperformance

Despite outperformance, sector stocks have a potential upside of 15-25% in the next 12 months

The engineering and construction (E&C) sector delivered an excellent performance in the last two financial years (FY2021-22 or FY22 and FY23’s nine-months) and there’s reason to believe that FY24 will also see outperformance. The sector has emerged from the pandemic with stronger balance sheets and more rational cost structures.

It has a big order book and it should see new order flows accelerate in FY24. Central Budgetary support for infrastructure creation was a key reason for the strong past performance and as elections draw nearer, this allocation may be ramped up. Historically, government Budgetary expenditure goes up, the year before