Target: ₹950

CMP: ₹881.10

H.G. Infra Engineering Ltd (HGIEL) has a robust order book at ₹12,595 crore (as of March 31), comprising 55 per cent from the EPC road projects and the rest from the HAM road projects. About 69 per cent of the total projects are from the Government of India and the rest are from the private sector, implying revenue visibility for the next two-three years. We expect the company to post revenue growth of 20 per cent CAGR over FY22-FY25.

In the Union Budget 2023-24, capex outlay was increased by 25 per cent for the road sector, 27 per cent for Jal Jeevan Mission (JJM) and 49 per cent for railways, creating significantly larger opportunities for companies like HG infra. The company is also diversifying into segments other than roads to capitalise on these massive opportunities. The company expects 20-25 per cent revenue contribution from segments other than roads. The bidding pipeline is also strong in Roads, JJM and railway segments. The management is expecting an order inflow of ₹8,000-9,000 crore in FY24 with EBITDA margins in the range of 15-16 per cent.

Recently, the company monetised its HAM asset at 1.55x of invested equity in four SPVs, which augurs well for the company. This will ensure capital infusion in prospective HAM projects. as well. The company reported healthy Q4-FY23 numbers with revenue/EBITDA/APAT growth of 43 per cent/52 per cent/62 per cent respectively. We continue to like the company’s execution capability and its order-book position, healthy balance sheet and high return ratios and expect revenues/EBITDA/APAT to grow at a CAGR of 20 per cent/18 per cent/20 per cent respectively over FY22-25.

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