Phillip Capital starts with 'Buy' on SRM Contractors; sees up to 61% upside

Brokerage firm Phillip Capital has initiated coverage on niche EPC player SRM Contractors with a 'Buy' rating, citing the company's strong execution moat in India's hilly and strategic border regions, where high complexity creates durable entry barriers. The company's strong order book of ₹15.5 billion and a robust bid pipeline provide multi-year growth visibility. 

 

"The MIPL acquisition strengthens geotechnical capabilities, expands the addressable market beyond J&K and Ladakh, and enables selective international opportunities. A net-cash balance sheet and adequate bank guarantee headroom support scalable growth," the brokerage said in its note. 

 

Analysts at Phillip Capital estimate consolidated revenue, Ebitda, and PAT CAGR of 51 per cent, 47 per cent, and 35 per cent, respectively, over FY26–FY28E. The brokerage values SRM at 12x FY28E P/E and has set a target price of ₹710. The target price implies an upside potential of around 61 per cent from Tuesday, January 27, closing price of ₹439.65.

 

 

On Wednesday, January 28, SRM Contractors' stock rose over 5.5 per cent to hit an intraday high of ₹463.7 on the NSE. Around 01:50 PM, the stock was trading at ₹453, up 2.8 per cent from the previous session's close. In comparison, the benchmark NSE Nifty50 was trading at 25,201 levels, up by a marginal 26 points or 0.10 per cent.  FOLLOW STOCK MARKET UPDATES TODAY LIVE

Here's why Phillip Capital is bullish on SRM Contractors:

Proven expertise in challenging terrain: According to Phillip Capital, SRM has proven execution capabilities in roads, bridges, tunnels, and slope stabilisation across the extreme terrains of Jammu & Kashmir and Ladakh. With 50 projects executed in geographies marked by steep gradients, logistical constraints, and temperatures ranging from –35°C to 45°C, the company has developed strong execution capabilities and a competitive moat. 

 

"As one of the few EPC players capable of delivering infrastructure in such conditions, the company enjoys a high bid-win ratio (50 per cent) in slope stabilisation projects, translating into superior pricing power and healthy Ebitda margins of over 15 per cent," the brokerage said in its note.

 

Geographical advantage: According to analysts, SRM operates primarily in high-barrier hilly regions such as J&K, Ladakh, Himachal Pradesh, and Uttarakhand, where competition is limited and execution capabilities are critical. These regions have historically contributed 75–80 per cent of the order book and are expected to account for 60–65 per cent going ahead. Analysts noted that SRM’s track record has made it a preferred EPC partner for agencies like NHAI, BRO, NHIDCL, and state PWDs.

 

Healthy order book pipeline: According to Phillip Capital, SRM’s order book stood at ₹15.5 billion as of H1FY26, around 3.0x FY25 revenues, offering 18–24 months of execution visibility. The backlog is well diversified across roads and bridges (64 per cent), slope stabilisation (26 per cent), and tunnels (9 per cent). The brokerage also highlighted a strong pipeline, with about ₹25 billion of bids submitted and nearly ₹50 billion under evaluation, supporting sustained growth.  ALSO READ | JM Financial initiates coverage on Thermax with 'Reduce' rating; check TP 

Acquisition-led scale-up: SRM’s acquisition of a 51 per cent stake in Maccaferri Infrastructure (MIPL) in FY25 strengthened its geotechnical and slope stabilisation capabilities while expanding its addressable market beyond J&K and Ladakh to pan-India (notably the North East) and select overseas opportunities. MIPL, which has a margin profile similar to SRM with PAT margins of around 10 per cent, reported around ₹1.5 billion in revenue in H1FY26 and is expected to generate ₹3 billion in FY26, backed by an order book of ₹2 billion.

 

Strong balance sheet: The brokerage added that SRM has delivered 35 per cent revenue CAGR over FY21–25 and is projected to grow at 51 per cent CAGR over FY25–28, including MIPL. Ebitda margins have improved to 15.4 per cent, supported by higher-margin projects, while the balance sheet remains net-cash positive with low leverage (D/E of 0.15x) and sufficient bank guarantee headroom to fund future growth.  Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.