HG Infra Engineering Ltd.’s shares went up by 3 per cent after the company reported a 37 per cent increase in profit for the quarter ended June 30, 2023, at ₹150.38 crore compared to ₹109.44 crore during the corresponding quarter last year.

The company’s revenues were up by 22 per cent to ₹1,351.15 crore compared to ₹1,105.90 crore last year. Sequentially, the company’s profits were lower by 12 per cent compared to ₹170.92 crore in the previous quarter.

Mangesh Bhadang, research analyst, Centrum Broking says, “HG infra reported good set of numbers for Q1FY24 driven by strong execution across its orderbook delivering growth in revenue. While the numbers were marginally below our estimates, we believe that trend in robust execution amidst good orderbook, stable margins and healthy balance sheet is likely to continue. The management indicated that it is likely to receive the required approvals for the sale of 4 HAM assets in this month and the deal is likely to be concluded soon. We have upgraded our EPS estimates by 9%/12% for FY24 and FY25 respectively.”

The same report suggests that HG Infra, is in the final stages of receiving approvals for stake sales from lenders and NHAI (National Highways Authority of India) for four HAM (Hybrid Annuity Model) assets. The approvals are expected to be secured by 31st August 2023, paving the way for the conclusion of the deal. The total equity investment for these projects stands at₹3.5 billion, and the expected valuation is approximately 1.4 times the Price-to-Book (P/B) ratio.

This imminent asset monetisation is set to free up capital, providing HG Infra with ample opportunities for future growth. Analysts maintain a buy recommendation for the company, with a SOTP (Sum of the Parts) based target price of ₹1,283. They believe that HG Infra possesses the necessary attributes of a successful EPC player, capable of delivering consistent 15-20% growth, generating good cash flows, and potentially recycling assets for a strengthened balance sheet.

The shares went up by 3 per cent to ₹956 at 1:03 p.m. on BSE.