Afcons Infra pops 4.5% as Nuvama initiates with 'Buy', 27% upside eyed

Afcons Infra share price: Engineering, procurement and construction company Afcons Infrastructure Limited's (AIL's) shares were in focus on Thursday, March 6, with the stock climbing 4.5 per cent to hit an intra-day high of Rs 439.40.  

  However, at 2:34 PM, Afcons Infra share price was off day's higher, and trading higher by 3.40 per cent, at Rs 434.80, on the BSE. In comparison, the BSE Sensex was trading higher by 537.54 points, or 0.73 per cent, at 74,267.77, around the same time. 

  Shares of the company rose after brokerage firm Nuvama Institutional Research initiated coverage on the stock with a 'Buy' rating, and a target price of Rs 535, based on 25x Q4FY27E EPS.

 

  "AIL clocked order book/revenue/PAT CAGR of 16 per cent/ 18 per cent/ 29 per cent over FY06–24. Given its book-to-bill of 3.8x (including L1 orders), we reckon Ebitda/PAT shall compound at 17 per cent/22 per cent over  FY25–27E. Initiate at ‘BUY’ with a TP of Rs 535 (25x Q4FY27E EPS)," said Parvez Qazi and Vasudev Ganatra in the brokerage's research note. 

  Shares of the company have gained over 5.5 per cent from its 52-week low hit on March 3, 2025.

  READ: INOX India shares gain 3%; rise 11% from 52-week low; details here  Considering this, here are the top factors cited by Nuvama to initiate coverage on Afcons Infra:

 

Strong cash flows

According to Nuvama analysts, AIL’s steady performance on the order intake, revenue and margin front is a direct consequence of its stellar performance on the cash flow/balance sheet front.

  "Today, its net working capital cycle is among the best in the EPC space," the research note stated.

  A major reason behind the improvement in working capital cycle of the company, according to the analysts, is the company’s ability to fund its operations through mobilisation advances from its clients. "On an average, the mobilisation advances have been around 30 per cent of its annual sales over the past decade," the note stated.

 

Growth trajectory stable

Afcons Infra's segmental and geographical diversification and the government’s focus on complex large-scale infra projects is likely to translate in to strong order intake for the company, according to the brokerage firm's view.   READ: MosChip Technologies share zooms 9% on launching MosChip DigitalSky GenAIoT

  "We anticipate the company to clock an EBITDA CAGR of ~17 per cent over FY25–27E. Besides, a reduction in leverage post-IPO, we believe the company would clock a PAT CAGR of 22 per cent over FY25–27E," the brokerage firm noted.

 

Revenue growth to be stable

AIL’s order intake in FY23/24 was sluggish, implying its revenue visibility was a low 2.4x at the start of FY25; however, robust order accretion in FY25E has boosted its order book, improving revenue visibility, the brokerage firm stated. 

  "We expect AIL’s order intake to remain healthy. We estimate AIL’s revenues would expand at a CAGR of ~18 per cent over FY25–27E," it noted.

  However, the company's top line is likely to be largely flat YoY in FY25E due to a relatively small order book at the beginning of the year; it would pick pace FY25E onwards, the report added.