This Infra Stock Is Axis Securities’ Pick of The Week, Here’s Why

HG Infra Engineering Ltd is a small-cap infrastructure development company with a market cap of Rs 4,006.72 crore. The stock has increased by 97.41 percent in the last year, from Rs 312.50 to Rs 616.90 as of 16 February, 3:30 pm IST. On the NSE, the stock has risen +21.70 (3.65 percent) on a year-to-date (YTD) basis and +32.60 (5.58 percent) in the last six months. Axis Securities has maintained a buy recommendation on the stock as a pick of the week following the company's impressive Q3FY22 results.

Key investment rationale for H.G. Infra Engineering Limited (HGIEL) as per the brokerage

• As of Dec'21-end, HGEIL's order book stands robust at Rs 7950 Cr (3.15x of FY21 revenue) and comprises road projects both EPC and HAM(46:54). Furthermore, the company is also diversifying into water infrastructure and railway projects and expects good order inflows. The order book gives revenue visibility for the next 2-3 years. We expect the company to deliver healthy revenue growth of 24% CAGR over FY21-24E.
• The road construction industry in India is undergoing a paradigm shift with notable investments in the segment and proactive policy support of the government. NHAI asset monetization plan, National Infrastructure Pipeline, and unveiling of the Gati Shakti Plan will provide further momentum to the execution and avoid unnecessary delays. Various initiatives undertaken by the Central government including 25000 kms of highways construction in FY23, are expected to significantly support the overall development of the road sector moving ahead, thereby creating massive growth opportunities for the company.
• HGIEL is one of the leading EPC contractors in India having a demonstrated project execution experience of nearing two decades. Leveraging this, it has efficiently and timely delivered complex and prestigious projects including highways, bridges, flyovers, amongst others. Factoring in better order inflows, we expect the company to maintain its margin profile between 15%- 16% over FY21-24E.

Buy for a target price of Rs 680

Axis Securities has claimed that "The company reported strong Q3FY22 results with Revenue/EBITDA/APAT growth of 25%/23%/36% YoY. Considering strong order book position, healthy bidding pipeline, new order inflows, emerging opportunities in the construction space, and the company's efficient and timely execution, we expect HGIEL to report Revenue/EBITDA/APAT CAGR of 24%/24%/32% respectively over FY21-FY24E. Stock is currently trading at 10x and 8.5x FY23E/FY24E EPS which is attractive. We recommend a Buy the stock for a target price of Rs 680."

Disclaimer

The stock has been picked from the brokerage report of Axis Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.