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Growth to remain intact; to churn assets in medium term

We met the management of HG Infra led by Chairman and Managing Director Mr. Harendra Singh. HG expects 17–18% YoY revenue growth and 15–16% EBITDA margins for FY26E, with order inflows of INR 110bn. HG has strong highways bid pipeline of INR 600bn. Additionally, it has submitted bids for projects worth c. INR 150bn where results are awaited. Increase in working capital during FY25 was mainly led by inventory in solar projects and delayed payments which is expected to normalize by 2Q26E. HG expects LoA for MSRDC projects in the near future and AD for major HAM projects by Dec-25. Monetization of solar/BESS assets is being considered through either InVIT mode or outright sale of assets. HG remains open to subcontracting work from major developers.

* FY26E guidance: Revenue: 17-18% YoY growth (appears optimistic); EBITDA margins: 15-16%; Order inflows: INR 110bn (FY25: INR 78bn); Capex: c.INR 250mn.

* Highways bid pipeline robust at INR 600bn. HG has also submitted bids of c.INR 150bn where results are awaited. HG is also exploring opportunities in airports, Metro and Power T&D verticals as well.

* NWC rise in FY25 was led by increase in solar inventory and delayed payments. The company expects it to come down by 1Q26E and normalise by 2Q26E.

* MSRDC projects: HG expects LOA by 2Q26 and delay is due to land acquisition issues. There is no risk of cancellation of projects. HG does not expect any major execution expected in FY26E from these projects.

* Appointed date update: HG expects to receive AD for VRK Pkg 10 & 13 in 2Q26E, Narol HAM by Sept-25 and Bahuvan HAM by Dec-25.

* EBITDA Margins: HG expects segment-wise EBITDA margins to remain between 11–18%, with highway projects likely to deliver margins upwards of 15%.

* Monetization update: HG is considering monetization of its solar and BESS assets in the medium term, either through the InvIT mode or outright sale.

* HG remains open to subcontracting opportunities, having previously worked with IRB Infrastructure and Adani group.

* Ganga Expressway project update: HG expects to complete the Ganga Expressway project within the next two months. It does not anticipate any early completion bonus.

* Reaping benefits of diversification; Maintain BUY: We like HG for its robust execution track record, strong growth and lean balance sheet. Monetization proceeds from 4 HAM assets have strengthened the balance sheet. We expect 14% EPS CAGR over FY25-27E. HG trades at an attractive valuation of 12x/10x FY26/27E EPS. We value HG’s EPC business at 14x Mar-27 EPS and HAM/Solar/BESS assets at INR 287/share (0.7-1x P/B) to arrive at SOTP-based revised price target of INR 1,740. Maintain BUY.

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