HG Infra Engineering, specialising in construction, development, design, and management of various infrastructure projects, witnessed its shares surge for the fourth consecutive trading session on Monday, marking a gain of 5.4% to reach ₹972.40 apiece.
The rally today can be attributed to the company's letter of acceptance from South Central Railway on Saturday, worth ₹447.11 crore. The LoA pertains to the doubling of track project, including electrification and signalling work, between Karanjgaon station as part of the Aurangabad Ankai Doubling Project in the Nanded Division of the South-Central Railway.
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On Friday, HG Infra Engineering was declared as 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 its recent report, brokerage firm Axis Securities maintains a positive outlook on the company, considering its strong execution capability, robust order book position, healthy balance sheet, and high return ratios.
At the end of the third quarter, the company boasts a robust order book totaling ₹9,623 crore. This comprises 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 in the country, significant opportunities are being created for companies like HG Infra, said Axis Securities.
To capitalise on these expanded opportunities, the company is diversifying into segments beyond roads, such as railways, metro, and solar projects. The company anticipates that 20%–25% of its revenue will come from these non-road segments.
The bidding pipeline remains robust, covering roads, JJM (Jal Jeevan Mission), and railway segments. Management expects an order inflow of ₹5,000–6,000 crore in FY24, with EBITDA margins ranging from 15.5% to 16%.
According to the brokerage, the company has completed the HAM (Hybrid Annuity Model) asset monetisation of three Special Purpose Vehicles (SPVs), with the remaining SPV scheduled for completion by March 24. This achievement marks a significant milestone for the company, as demonstrated by the completion of the first tranche of three SPVs.
On November 21st, 2023, the company transferred a 100% stake from the company to Highway Infrastructure Trust. The completion of the HAM asset monetisation is a positive development for the company, the brokerage highlighted.
Axis Securities anticipates the company to report revenue, EBITDA, and PAT growth of 17%, 16%, and 15% CAGR over FY23–25E. The brokerage recommends a 'BUY' rating on the stock with a target price of ₹995 apiece.
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