Buy HG Infra Engineering Ltd For Target Rs. 1720 by Axis Securities
Diversified Orderbook & Robust Execution to Drive Growth
Est. Vs. Actual for Q3FY25: Revenue – MISS; EBITDA Margin – INLINE; PAT – MISS
Change in Estimates post Q3FY25 (Abs.)
FY25E/FY26E: Revenue: -1%/-1%; EBITDA: 0%/-1%; PAT: -2%/-3%
Recommendation Rationale
* Healthy Order Book: As of December 31, 2024, the company's total order book stood at Rs 15,080 Cr, equivalent to 3x FY24 revenue. A significant portion, 94%, of these projects is attributed to the Government of India, with the remaining 6% from the private sector, ensuring strong revenue visibility for the next 2-3 years. The company is anticipated to achieve a 15% CAGR revenue growth over FY24-26E.
* Diversified Revenue Streams: 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 25% of the total order book, reducing dependence on a single sector. Management is also exploring opportunities in the transmission sector, particularly in Tariff-Based Competitive Bidding (TBCB) projects, which share similarities with EPC projects. This diversification and an expanding sectoral presence are expected to support 15% CAGR revenue growth over FY24-26E.
* Order Inflow & Segment Diversification: The company anticipates an order inflow of Rs 11,000-12,000 Cr in FY25, with projects worth around Rs 8,200 Cr already secured in 9MFY25. Management expects 35-40% of the order book to come from non-road projects over the next 2-3 years. Additionally, the company aims to secure Rs 10,000- 12,000 Cr in new orders in FY26.
Sector Outlook: Positive
Company Outlook & Guidance: The company has guided for an order inflow in the range of Rs 11,000-12,000 Cr and expects revenue growth of 17-18% and an EBITDA margin of 15-16% in FY25. For FY26, the guidance for revenue stands at ~Rs 7000 Cr, EBITDA margins of 15%-16% and inflow of Rs 10000 Cr.
Current Valuation: 14x FY26 EPS (Earlier Valuation: 15x FY26 EPS) and HAM/Solar assets/Battery storage 1.2x/1x/1x book value respectively
Current TP: Rs 1,720/share (Earlier TP: Rs 1,800/share)
Recommendation: We maintain our BUY recommendation on the stock
Financial Performance
HG Infra Engineering Ltd. (HGIEL) reported mixed numbers in Q3FY25. It reported revenue of Rs 1,509 Cr (up 12% YoY). The company posted EBITDA of Rs 250 Cr (up 17% YoY) and PAT of Rs 137 Cr (down 34% YoY). It registered EBITDA margins of 16.6% in Q3FY25 (our estimate: 15.9%) compared to 15.9% in Q3FY24.
For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home
SEBI Registration number is INZ00016163
