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Reliance Securities
HG Infra Engineering (Buy)
CMP: ₹232
Target: ₹385
HG Infra Engineering is an infrastructure company promoted by Hodal Singh, a stalwart with 40 years of experience in the construction sector. The firm executes civil construction projects, such as extension and grading of runways, railways and land development; and in recent times, the company has diversified into water pipeline projects as well.
HG Infra Engineering reported a better than expected performance in Q1 FY20 despite a marginal misses on revenue booking.
While revenue grew by 17 per cent y-o-y to ₹52.6 lakh as against our estimates of ₹53.5 lakh, EBITDA grew by about 19 per cent y-o-y to ₹79.5 crore and EBITDA margin stood at 15.1 per cent (+21 bps y-o-y and -96 bps q-o-q) against our assumption of 15 per cent.
Higher than estimated margin and lower finance cost resulted better than estimated growth in PAT growth of 27 per cent y-o-y to ₹34.4 crore higher than our estimate of ₹31.2 crore.
Valuation: HG Infra Engineering continues to report steady performance mainly led by continuous traction in execution. We still expect HG Infra’s earning to clock 31 per cent CAGR in the next two years. We maintain our buy recommendation on the stock with a target price of ₹385.
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