Hold HG Infra Engineering: target of Rs 1000: ICICI Securities

ICICI Securities's research report on HG Infra Engineering

Order awarding in the road sector has been soft for the past two years, impacting HG Infra’s (HG) order book (OB), now at INR 147bn (2.2x TTM revenues) – part of this (INR 31bn) is yet to receive appointed date. To offset this, HG forayed into solar and battery storage (BESS), securing INR 50bn worth of orders in these segments. However, with no execution track record in these areas and high competition from entrenched players, risks to execution and margins have increased. Q1 EBITDA margin shrank 240bps YoY to 13.8% while PAT fell 10% YoY to INR 1.3bn. Management maintains its FY26 guidance of 16% execution growth and 15–16% margins. In favourable light, it monetised 5 HAM assets at an attractive valuation. Although a better OB remains key for improved earnings. Downgrade to HOLD (from Add); TP revised to INR 1,000.

Outlook

We downgrade the stock to HOLD, from Add, on account of a weak executable OB and with its entry into new segments, execution here remains to be seen. TP revised to INR 1,000.