HG Infra's Order Inflows, Robust Financials To Drive Growth, Says Emkay Global
The brokerage has re-initiated a coverage on the company with a 'buy' rating, and a target price Rs 2,100 per share.
HG Infra Engineering Ltd.'s "best in class" operating and financial metrics, and positive order inflow outlook in post election phase will drive growth, according to Emkay Global Research.
The brokerage has re-initiated a coverage on the company with a 'buy' rating, and a target price Rs 2,100 per share, implying a 24% upside from Tuesday's closing price.
HG Infra Engineering's shift from small subcontractor into diversified infrastructure segment with good operating and financial metrics has supported swift and stress-free growth, Emkay Global said in a note on Tuesday.
The company is efficient in managing its supply chain and inventory. Its digitalisation initiatives are "top notch", alongside its adept working capital management, the note said. HG Infra Engineering's balance sheet also remained stable.
The infrastructure company witnessed a slowdown in orders in financial year 2024 because of general election and restriction on National Highways Authority of India, Emkay Global said.
The research firm expects pick-up in project awards in upcoming months under 'India@2047' vision. There could be further announcements of highway network development.
Emkay Global Research has penned down a 22%, 20%, and 21% revenue, Ebitda, and APAT over FY24-27, as order inflows are going to increase in the road infrastructure segment, the brokerage said.
HG Infra Engineering is also expecting a rapid growth in its railways and solar portfolio, the brokerage said.
Emkay Global On HG Infra
Makeover from a small subcontractor into diversified infra play offers best-in-class operating and financial metrics, the brokerage said.
HG Infra Engineering has seen an order slow-down in FY24 in the run up to the elections and due to restrictions
The company is expanding into railways where focus on high-speed corridors, freight, and station upgrade.
Railways, water, and solar segments offer steady mid-to-long term earnings visibility, according to Emkay Global.
The brokerage expects CAGR of 21-22% each in revenue and APAT during FY24-27; value it based on SOTP.
Key risks:
Project delays.
Economic and policy scenario.
Competition.
Commodity price volatility in consumables.
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Shares of HG Infra Engineering Ltd. rose 5.59%, the highest level since July 9, before erasing gains to trade 0.59% lower at Rs 1,691.80 per share as of 10:37 a.m. This compares to a 1.03% decline in the NSE Nifty 50.
The stock has gained 92.28% in 12 months, and 98.81% year-to-date. Total traded volume so far in the day stood at 2.7 times its 30-day average. The relative strength index was at 52.60.
Out of 15 analysts tracking the company, 14 maintain a 'buy' rating and one recommends a 'hold', according to Bloomberg data. The average 12-month analysts' consensus price target implies a downside of 15.2%.
