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This Infrastructure Stock Has A “BUY” Call From ICICI Securities With A Gain of 20%

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ICICI Securities Limited (ICICI Securities) has issued a buy call on the stock of H.G. Infra Engineering Limited (HGIEL), with a target price of Rs 885, representing a 20% increase over the current market price of Rs 715 over the next 12 months. The stock, however, was trading at a price of Rs 740 on the NSE when the brokerage assigned it a buy rating. H.G. Infra Engineering Limited (HGIEL) is an infrastructure company with a primary focus on highways, roads, bridges, and other civil construction projects.

 

Q2FY22 results of the company

Q2FY22 results of the company

For Q2FY22, HG Infra recorded a solid set of results. The company's standalone revenue improved 60.4% YoY to Rs 749.6 crore, backed by its strong executable order book position, pick-up in execution post second-wave disruptions, and receipt of appointed date in most of its projects says ICICI Securities.

According to the research report of the brokerage, the company's EBITDA was at Rs 121.8 crore, up 58.3% YoY, with a margin of 16.3% and PAT was at Rs 69.8 crore (up 113.8% YoY).

Key triggers for future price performance of H.G. Infra according to ICICI Securities
 

Key triggers for future price performance of H.G. Infra according to ICICI Securities

  • HG is likely to be one of the major recipients of thriving roads, railways and water supply segments. Healthy order inflows to aid its order book position.
  • Strong order book position, receipt of appointed date in most of its projects, and execution pick-up to translate into 24.3% topline CAGR over FY21-23E.
  • The current order mix with built-in raw material price variation clauses in most of its contracts provides margin sustainability at ~16%.
  • Double-digit return ratios and lean balance sheet position.
Buy HG Infra Engineering with a target price of Rs 885

Buy HG Infra Engineering with a target price of Rs 885

The company is actively looking to diversify itself by targeting the railways, airport and water infra segment and it has reported 28.8% revenue CAGR during FY16-21; operating margin improved consistently from 11.0% in FY16 to 16.2% in FY21, says the research report of the brokerage. HG Infra's share price has grown 2.8x over the past three years (from ~Rs 267 in March 2018 to Rs 740 levels in November 2021).

ICICI Securities has claimed in its research report that "Considering its healthy executable order book position and robust execution skill, we expect execution momentum to continue in the near-to-medium term. Additionally, elevated operating margins, strong return ratios and lean balance sheet position remains key positive. Given the superlative execution, we raise our FY22, FY23 earnings estimates by 8.5%, 6.4%, respectively. We maintain a BUY rating with a revised target price of Rs 885/share (based on SoTP based valuation). We value core business at 15x FY23 P/E and HAM projects at 1x equity invested."

Disclaimer

Disclaimer

The above stock is picked from the brokerage report of ICICI 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.

Story first published: Friday, November 12, 2021, 9:15 [IST]
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