HGInfra posted modest revenue growth of 8.6% YoY in Q4FY20, despite loss of 10-15 days in Mar’20 (revenue loss ~Rs1bn). Amidst labour constraints and weak supply chain, the company resumed operations in its project sites after relaxations in lockdown which are currently operating at 50-70% efficiency levels. On the back of strong balance sheet, company has not availed any moratorium on loans and is confident of servicing debt from its operating cash flows. Management expects labour force to rise to 80-85% pre-covid levels within one month (up from current levels of 50-70%) and expects strong execution momentum from 3QFY21E (post monsoon). We remain positive on the company given its 1) comfortable order book (~Rs71bn as on 4QFY20), 2) strong execution capabilities, 3) comfortable working capital cycle, 4) geographical diversification and 5) its transition into full-fledged contractor and improvement in technical prequalification (from Rs2.5bn to Rs17.5bn in 5 years).
OutlookAt CMP, the stock trades at a P/E of 19.4x/6.2x on FY21E/FY22E EPS and is trading at an EV of 6.7x/3.9x FY21E/FY22E EBITDA. We maintain BUY rating on the stock with TP of Rs259.
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