HG Infra rises 4% on Rs 535 cr-order win from RVNL; stock up 30% in 3 mths

As per analysts at Centrum Broking, the stock of HG Infra has headroom to re-rate as the company is continuing to deliver on growth and monetisation targets

Shares of HG Infra Engineering rose around 4 per cent on the BSE to Rs 748 per share in Thursday’s intra-day trade after the company bagged an order worth Rs 535.15 crore from Rail Vikas Nigam (RVNL).

“HG Infra Engineering has been declared as the lowest bidder (L-1) by Rail Vikas Nigam for a project involving construction of foundations, substructure & superstructure, earthwork & allied works for viaduct 1 & 2 in connection with Bhanupali-BilaspurBeri new railway line in Bilaspur, Himachal Pradesh,” it said in a filing. 

While RVNL’s estimated cost of the project is Rs 535.15 crore, HG Infra bid for Rs 466.11 crore, making it the lowest bidder. RVNL was trading around 5 per cent higher, at the time of writing this report. 

The construction engineering giant’s share price has gained 30 per cent in the last 3 months, while its 6-month gain is around 35 per cent. In comparison, the BSE Sensex has risen 1.4 per cent in the last 6 months, while it is down around 3 per cent over the past 3 months. 

Last month, the company had received a letter of acceptance from the Delhi Metro Rail Corporation (DMRC) for a project worth Rs 399 crore.

Prior to that, in December 2022, it received a letter of award for a project in Haryana from the National Highways Authority of India (NHAI). NHAI's estimated cost of the project was Rs 744 crore while HG Infra's bid for the project was Rs 997.1 crore.

As per analysts at Centrum Broking, the stock has headroom to re-rate as the company is continuing to deliver on growth and monetisation targets. 

“The company targets to firm up monetization of 4 HAM assets by Mar 2023, which would strengthen the balance sheet and release capital for future growth. Its valuations at 9.2x/8.4x FY24/25E EPS are inexpensive and at discount to peers like PNC, GR Infra and KNR. We maintain ‘buy’ with a 12-month target price of Rs 1,022 (upside of xx per cent).  

The brokerage expects robust revenue/EPS CAGR of 18 per cent/16 per cent over FY22-25E driven by a strong backlog. Margins are estimated to remain in the 15-16 per cent  range and leverage (net debt + mobilization advance)/EBITDA should remain under control at 0.8x in FY25E, it said. 

In the Decmeber quarter (Q3FY23), HG Infra reported a 30 per cent YoY rise in its consolidated net profit to Rs 131 crore, while revneue was up 24 per cent to Rs 1,185 crore. The company’s EBITDA margin was at 20.1 per cent from 19.3 per cent in the previous year quarter. 

HG Infra’s order backlog remains strong at Rs 111 billion, 92 per cent of which is under execution. It has bid for projects worth Rs150 billion where bids are yet to open, said Centrum Broking. 

“Also, it is planning to bid for projects worth Rs 800 billion across highways, metro, railways and water. Hence, it has guided for incremental order wins of Rs 35-40 billion (implying FY23 inflows of Rs 90-95 billion), while revenue guidance has been for Rs 45 billion and Rs 55 billion in FY23 and FY24, respectively, backed by strong execution in Ganga expressway and new HAM,” it said in a result review.