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H G Infra Engineering Ltd’s (HGINFRA) revenue/EBITDA/APAT came in at Rs14.7/2.4/1.5bn, beating our estimates by 16%/28%/34% led by strong execution. With order inflow (OI) of Rs86.6bn in FY23, the order book stands at Rs 126bn at FY23 (2.9x FY23 revenue). Given robust order inflows, strong FY23 performance and comfortable order book-to-sales ratio, management has guided for 25% revenue growth for FY24, with EBITDAM of 16% and OI guidance of Rs80-90bn. Monetization of 4 HAM assets for a consideration of Rs13.9bn is expected to be completed in 2 tranches by Sept’23 and Jan’24. This monetization will release capital for further infusion of equity in future projects. Equity requirement in HAM projects stands at Rs 4.4/3.6/0.8bn for FY24/25/26. Gross standalone debt stands at Rs5bn (vs Rs3.1bn in FY23) led by increase in term loan on account of capex. Management aims to reduce the same to Rs3-3.5bn be end of FY24.

We remain positive on the company given its 1) comfortable order book (~Rs126bn as on 4QFY23), 2) strong execution capabilities, 3) comfortable working capital cycle, 4) geographical diversification and 5) its transition into full-fledged contractor. Given the robust execution we have revised our revenue estimates by 20% / 29% for FY24E and FY25E. At CMP, the stock trades at a P/E of 12.3x/9.9x on FY24E/FY25E EPS and an EV of 7.7x/6.3x FY24E/FY25E EBITDA. We maintain BUY rating with a revised target price of Rs1,202/share, implying an upside potential of 26% from the current levels.

Result Highlights

* For Q4FY23, HGInfra reported strong revenue growth of 43.2%YoY to Rs14.7bn (above our estimates of Rs12.7bn) led by strong execution.

* EBITDA came in at Rs2.4bn up 51.6% YoY (above our estimate of Rs1.9bn), with EBITDAM expanding 89bps to 16.2% (above our and street estimates of 14.6% and 15.1%) on account of better execution and lower raw material cost.

* On bottom-line front, adj. PAT came at Rs1.5bn (above our estimates of Rs1.1bn) driven by better operating performance.

* During 4QFY23, the company has bagged orders worth Rs37.6bn.

* At the CMP, the stock trades at a PE of 12.3x FY24E and 9.9x FY25E EPS

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