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HG Infra reported 22%/24% growth in sales/PAT for FY23 on account of strong execution. Order book at the end of the year stands at Rs127bn – up 60% YoY. During the year, the company has successfully diversified into the metro/railways segment with order booking of Rs15bn. Apart from these sectors, the company is also bidding for the water and airports sector, which is a key positive from a medium-term perspective in our view. The company is targeting 23% growth in sales for FY24, with order inflow expectation at Rs80- 90bn. Over the next few years, the non-road sector is expected to constitute 20-25% of orders. Recently, the company has entered into a share purchase agreement for four HAM projects at 1.55x P/B. We maintain our BUY rating on the stock with Mar-24 TP of Rs1,130.

Good growth with stable margins HG Infra reported 22%/24% YoY sales/PAT growth for FY23 on account of strong execution and stable margin. Net debt at standalone level stood at Rs3.2bn, with debtto-equity at 0.28x. NWC days stood at 23 days – well below 31 days in FY22.

Monetization value has been good, gives confidence for the HAM portfolio HG Infra has entered into a share purchase agreement for four HAM projects, with P/B at 1.55x. We believe this will raise investors’ confidence on the type of HAM projects won by the company.

Strong order book along with diversification to help in medium-term growth Order book at the end of FY23 stands at Rs127bn, up 60% YoY on account of ~Rs90bn of inflow (because of Rs45bn Ganga expressway order from Adani). During the year, the company has been able to diversify into the metro/railway sector with ~Rs15bn of order inflow. The company has a target of Rs80-90bn of orders during FY24, with non-road contributing ~Rs20bn.

Valuation and outlook Over the past five years, HG Infra has registered sales/EBITDA/PAT CAGR of 26%/28%/38%, as it has continuously invested in equipment along with maintaining strong execution. We believe the company's diversification strategy will help it to have continued growth in the long run. We have built in order inflow of ~Rs60bn for FY24 and FY25 each. Our PAT CAGR over FY23-FY25 stands at ~20%. We have valued the stock on SoTP basis, with EPC business being valued at 10x its FY25 EPS of ~Rs93 (implying Rs926/share) and investment in HAM at Rs13.3bn (Rs5.3bn for the four HAM projects and 1x for the rest of the investment till FY24). We maintain our BUY rating. Over the past one year, HG Infra is among the only few stocks in the road EPC space that has given good returns.

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