Buy HG Infra; target of Rs 1017: HDFC Securities

HDFC Securities' research report on HG Infra

HG Infra (HG) reported revenue/EBITDA/APAT at INR 11/2/1bn (missing)/beating our estimate by (1.9)/2/1.4% resp. It expects FY23 revenue growth of 25% plus (INR 46bn) with an EBITDA margin of 15% plus on the back of a robust OB of INR 110bn. It reported an early completion bonus of INR 160mn in Q3FY23 and expects INR 45mn in Q4FY23. The order inflow (OI) in 9MFY23 was INR 60bn with another INR 30-40bn expected in Q4FY23. It is L1 in its first non-highway project i.e. Delhi Metro project worth INR 4bn with the scope of work including the construction of an elevated viaduct and four elevated stations. It expects a margin of 14% from this project and a margin of 15% plus at the aggregate level, going forward.

Outlook

The company plans to monetise four HAM projects at a ~40% premium to book value of INR 3.5bn invested equity by Sep’23. Given robust order inflow and strong execution, we maintain BUY, with an increased TP of INR 1,017 (14x Dec-24E EPS) to factor in a higher level of execution and better EBITDA margin.