Buy H.G. Infra Engineering; target of Rs 441: HDFC Securities

HDFC Securities is bullish on H.G. Infra Engineering has recommended buy rating on the stock with a target price of Rs 441 in its research report dated November 11, 2019.

Broker Research

November 18, 2019 / 14:03 IST

26 Aug, 2025 12:21

Volume

Todays L/H

HDFC Securities' research report on H.G. Infra Engineering

Inline Rev/EBIDTA, APAT beats estimates: HG infra reported Rs 4.7bn of revenue during 2QFY20. EBIDTA margins expanded 94bps YoY to 15.5%. EBIDTA beat stood at 3%. Flat YoY Depreciation, YoY dip in Interest cost and lower tax rate (new ETR) resulted in APAT beat. About 51% of order backlog yet to commence execution: HG has Rs 62bn of order backlog of which Rs 32bn is yet to move into execution (2 HAM projects and 2 EPC packages). All these projects are expected to receive ‘Appointed Dates’ in 3QFY20 with land acquisition in advance stages. This coupled with ramp-up in execution of Hapur Moradabad project may help HG achieve a 25-30% revenue growth in FY20. Pending HAM equity requirement is ~Rs 2.5bn spread across FY20-21E. De-leveraging target for FY20E on track: HGs gross debt stands at Rs 3.4bn (including Rs 0.4bn in promoter loans) vs. Rs 3.5bn QoQ. Of HGs Rs 1.8bn debtors outstanding in the World Bank funded Rajasthan State project as of 1QFY20, the company received Rs 1.2bn during 2QFY20. Ramp-up in execution in Hapur Moradabad project (Rs 3bn expected during FY20E) coupled with mobilization advance (in excess of Rs 1bn) from projects awaiting ADs, HG is working towards its FY20E target gross debt level of Rs 2.5bn (Rs 1bn reduction vs. 1HFY20).

Outlook

HG Infra reported Rev/EBIDTA/APAT beat of 1/3/8.5% vs our estimates. Higher EBIDTA margins (+35bps vs estimate), stable interest cost/depreciation resulted in APAT beat. We maintain BUYon HG with SOTP of Rs 441/Sh, valuing the EPC business at 12x FY21E EPS.

For all recommendations report, click here