Buy HG Infra Engineering Ltd For Target Rs.832 - Yes Securities
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Strong guidance
Our view
H G Infra Engineering Ltd (HGINFRA) reported very strong set of numbers, beating our and street estimates on both execution and margins front. The execution momentum was driven by ramp up in operations of its under‐construction projects. On the back of strong order book, robust bid pipeline and 5 HAM projects expected to receive AD by 1HFY23 leading to entire OB under execution, management expects robust momentum in execution giving a guidance of Rs50bn/ Rs60bn for FY23E/24E with EBITDA margins in the range of 15.5‐16%.
We remain positive on the company given its 1) comfortable order book (~Rs79.7bn as on 4QFY22), 2) strong execution capabilities, 3) comfortable working capital cycle, 4) geographical diversification and 5) its transition into full‐fledged contractor and focus on asset monetization. We expect the company to post revenue/EBIDTA CAGR of 15%/8% over FY22/FY24E. At CMP, the stock trades at a P/E of 8.6x/7.6x on FY23E/FY24E EPS and an EV of 5.9x/5.2x FY23E/FY24E EBITDA. We maintain BUY rating with a target price of Rs832/share, implying an upside potential of 58% from the current levels.
Result Highlights
* For Q4FY22, HGInfra’s revenues grew by 0.8%/11.6% YoY/ QoQ to Rs10.6bn (beating our/ street estimates of Rs8.6bn/ Rs10.3bn) led by strong execution momentum across its key projects..
* EBITDA was muted to Rs1.9bn (above Ysec estimate of Rs923mn), with EBITDAM contracting 16bps to 18.1% (above Ysec/ street estimate of 10.7%/15.6%) with better operating efficiencies.
* On bottom‐line front, adj. PAT came at Rs1.0bn (beating our estimates of Rs336mn) driven by higher execution and sustained margins.
* During 4QFY22, the company bagged order worth Rs8.4bn and has received Appointed Date for Raipur‐Viskhapatnam AP‐I worth Rs8.6bn.
* At the CMP, the stock trades at a PE of 8.6x FY23E and 7.6x FY24E EPS.
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