HG Infra Engineering, specializing in the construction, development, design, and management of various infrastructure projects, saw its shares surge for the fourth consecutive trading session on Monday, rising by 5.4% to reach ₹972.40 apiece.
The uptrend today can be attributed to the company’s receipt of a letter of acceptance from South Central Railway on Saturday, valued at ₹447.11 crore. This LoA pertains to the Doubling of Track project, including electrification and signaling work, between Karanjgaon station as part of the Aurangabad Ankai Doubling Project in the Nanded Division of the South-Central Railway.
Furthermore, on Friday, HG Infra Engineering was declared the L-1 bidder by East Central Railway for the construction of a double-line track (3rd & 4th line) formation, covering various works such as earthwork, bridges, electrification, and other miscellaneous tasks in the Gaya-Son Nagar section of the DDU Division in Bihar. The total value of this order amounted to ₹709.11 crore.
In a recent report, brokerage firm Axis Securities maintains a positive outlook on the company, citing its strong execution capability, robust order book position, healthy balance sheet, and high return ratios. As of the end of the third quarter, the company’s order book stands at ₹9,623 crore, with 51% from EPC road projects, 37% from HAM road projects, and the remaining 12% from railway & Metro projects.
With the Interim Union Budget for 2024–25 increasing the Capex outlay for the Roads & Railways sector to bolster infrastructure development, significant opportunities are emerging for companies like HG Infra, according to Axis Securities.
To leverage these expanded opportunities, the company is diversifying into segments beyond roads, such as railways, metro, and solar projects. It anticipates that 20%–25% of its revenue will originate from these non-road segments.
The bidding pipeline remains robust, encompassing roads, JJM (Jal Jeevan Mission), and railway segments. Management anticipates an order inflow of ₹5,000–6,000 crore in FY24, with EBITDA margins ranging from 15.5% to 16%.
Regarding the completion of the HAM (Hybrid Annuity Model) asset monetization, Axis Securities notes that the company has completed the process for three Special Purpose Vehicles (SPVs), with the remaining SPV scheduled for completion by March 2024. This achievement marks a significant milestone for the company, signaling progress as it transfers a 100% stake from the company to Highway Infrastructure Trust.
Axis Securities projects revenue, EBITDA, and APAT growth of 17%, 16%, and 15% CAGR over FY23–25E for the company. Consequently, the brokerage recommends a ‘BUY’ rating on the stock with a target price of ₹995 apiece.
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