This Midcap Infra Stock Is A Good Buy After Strong Numbers, Budget Outlay

The huge capital expenditure in the Union Budget for 2022-23 is likely to open-up good opportunities for the infrastructure sector. Here is a company that is likely to benefit.

HG Infra Engineering: Good numbers on the back of solid execution

According to Emkay Global Sales grew by 24 per cent, while EBITDA and PAT grew by 23% and 36% . "Margins have been largely within 20bps, while execution on the back of decent orders was the key growth driver," the brokerage notes.

Current market price	Rs 648
Target price	Rs 870
Gains	35%

"We believe FY22 has been a great year for HG Infra, as it was marked by strong execution (FY22E sales growth expected to be 40% YoY vs. FY19-FY21 sales CAGR of 12%) and robust inflows (FY22 inflows expected to be Rs 50-60 billion vs. average inflows in of Rs 32 billion FY19-FY21)," the brokerage has said.

Strong upward trajectory of growth

In Jan'22, the company was awarded an EPC project in Karnataka (development of a 6-lane highway with access control of Neelmangala-Tumkar, including Tumkar bypass section of NH-48 under Bharatmala Pariyojna Phase I) at a bid project cost of Rs 8.44 billion.

"While this seems to be less than the NHAI cost of over Rs10 billion, management has clearly indicated that its evaluation does not suggest any margin dilution in this project. HG has received a provisional completion certificate for the Rewari Ateli Mandi (HAM) and Jodhpur-Marwar Junction-Jojawar section. The Rewari Ateli Mandi (HAM) section was completed 147 days ahead of the revised scheduled completion date," the brokerage has said.

Buy the stock of HG infra for a price target of Rs 870

Emkay Global has raised its FY22E sales/PAT by 8%/11%, factoring in strong execution and inflows.

"We increase FY23/FY24E EPS by 2-4%. We believe the trajectory of inflows has moved from Rs 20-40 billion to Rs50-60bn in the last two years. With a strong balance sheet, RoE profile and diversification in the medium term, the stock is a good candidate for further re-rating. Maintain Buy with a target price of Rs 870 (Mar'23E), based on 13x FY24E EPS and 1 times the investment in HAMs," the brokerage has said.

The stock of HG Infra was last seen trading at Rs 648 on the NSE.

Disclaimer

Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and his family do not hold shares of HG Infra listed above while writing the article.