Buy HG Infra Engineering Ltd For Target Rs. 1,530 By Axis Securities Ltd
Est. Vs. Actual for Q4FY25: Revenue – BEAT; EBITDA Margin – MISS; PAT – BEAT
Change in Estimates post Q4FY25 (Abs.)
FY26E/FY27E: Revenue: 2%/0%; EBITDA: 0%/0%; PAT : -4%/0%
Recommendation Rationale
Healthy Order Book: As of 31st Mar’25, the company's total order book stood at Rs 15,281 Cr, ensuring strong revenue visibility for the next 2-3 years. 64% of the company's total order book comes from the EPC sector, while 36% is from HAM road and solar projects. The company is anticipated to achieve a revenue growth of 15% CAGR over FY25-27E.
Order Inflow & Segment Diversification: Traditionally focused on Roads and Highways, the company has successfully expanded into the Railways and Solar sectors, securing multiple orders in these segments. These now contribute 32% of the total order book, reducing dependence on a single sector. The company anticipates an order inflow of Rs 11,000 Cr in FY26, in which management expects 30% of the order book to come from non-road projects. Project bidding pipeline remains strong from NHAI and State Governments like Maharashtra and UP.
Contraction in EBITDA margin: In Q4FY25, margins declined to 14.6% due to certain provisions and a few projects impacted by changes in law, where clarity was initially lacking. However, the management remains confident of margin improvement in FY26, supported by strong execution and increased segment diversification. We expect the company to deliver EBITDA and PAT growth of 12% and 10% CAGR over FY25-27E.
Sector Outlook: Positive
Company Outlook & Guidance: The company has guided for an order inflow in the range of Rs 11,000 Cr and expects revenue growth of 17-18% and an EBITDA margin of 15-16% in FY26.
Current Valuation: 10x FY27 EPS (Earlier Valuation: 14x FY26 EPS) and HAM/Solar assets/Battery storage 1.2x/1x/1x book value respectively
Current TP: Rs 1,530/share (Earlier TP: Rs 1,800/share)
Recommendation: We maintain our BUY recommendation on the stock and roll over our estimates to FY27.
Financial Performance
HG Infra Engineering Ltd. (HGIEL) reported mixed performance in Q4FY25. Revenue stood at Rs 1,973 Cr, up 21% YoY. EBITDA came in at Rs 288 Cr, registering a 9% YoY growth, while PAT stood at Rs 213 Cr, up 33% YoY. EBITDA margin contracted to 14.6% in Q4FY25 (our estimate: 16.4%) compared to 16.2% in Q4FY24.
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SEBI Registration number is INZ000161633
