Construction - Bull's eye: DFCC optimistic on meeting targets - Edelweiss

In a recent interview, Mr. R K Gupta, Managing Director, Dedicated Freight Corridor Corporation (DFCCIL), reiterated that the corporation will award civil construction contracts for 1,000 km (Phase I of both Eastern and Western corridors) in FY13. He has also expressed confidence that DFCCIL will meet its target of commissioning the corridor with progress on certain sections being ahead of schedule. With 80% of land having been acquired, significant progress has been made on eliminating bottlenecks in project award. This has reinforced our bullish view on DFCC with respect to project award and execution; we estimate the corporation to generate INR500bn worth of orders over FY13-14. This will benefit construction as well as systems (electrical and signalling) companies. Likely beneficiaries include L&T (BUY), NCC (BUY), and Simplex (HOLD) on the construction front, and Siemens (HOLD), ABB (REDUCE), Alstom T&D (Not Rated), and Alstom India (Not Rated) for systems contracts.

Project award of ~1,000 route km in FY13

Mr. Gupta has indicated that final work orders for construction of around 1,000 route km will be awarded in FY13. Financial bids for the 650-km-long Rewari-Palanpur section of the Western corridor have already been invited and are scheduled to be opened on October 30. As for the 350-km-long Khurja-Kanpur section on the Eastern corridor, the technical bidding process has been completed and sent for evaluation to the World Bank—the funding agency. By year end, both these contracts will have been awarded; we estimate them to be worth ~INR180bn.

Confident of meeting project implementation timelines

DFCCIL is confident of completing the ~INR880-bn project within the stipulated period. It has advanced commissioning targets of certain sections. While the 66-km-long Durgawati-Karwandia section will be inaugurated in December 2013, the 52-km Sonnagar-Mughalsarai section will be commissioned in December 2015.

Our view: Bullish

Significant progress on land acquisition and environmental clearance fronts as well as a systematic approach to project implementation (with regular monitoring by multilateral agencies like World Bank and JICA) underpin our bullish stance of DFCC. DFCC is expected to trigger significant opportunities for infra players apart from giving a fillip to the country's logistic network.

Source : Equity Bulls

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