Buy HG Infra Engineering, target price Rs 820: Emkay Global

Emkay Global has buy call on with a target price of Rs 820. The current market price of HG Infra Engineering Ltd. is Rs 617.5.

Time period given by analyst is one year when HG Infra Engineering Ltd. price can reach defined target.

HG Infra Engineering Ltd., incorporated in the year 2003, is a Small Cap company (having a market cap of Rs 4027.57 Crore) operating in Infrastructure sector.

HG Infra Engineering Ltd. key Products/Revenue Segments include Contract Revenue and Sale of services for the year ending 31-Mar-2021.


Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 786.52 Crore, down -16.75 % from last quarter Total Income of Rs 944.73 Crore and up 62.22 % from last year same quarter Total Income of Rs 484.84 Crore. Company reported net profit after tax of Rs 74.51 Crore in latest quarter.

Investment Rationale
Robust awarding activity in the road space, superior order winning ability, cost-cutting digital initiatives, long-term diversification efforts and margin stability despite inflation support our positive outlook on the company. The brokerage estimates a 16% EPS CAGR for FY22-24, in line with consensus expectations. It maintains Buy with a revised Dec’22 TP of Rs820. It assigns a 13x multiple on the standalone business (unchanged) and value HAM investments at Rs42/share. At CMP, standalone EPC business in valued at ~10x Dec’23 EPS. Key risks include significant slowdown in awarding activity across road/non-road segments, margin impact from commodity inflation in H2 and HAM monetization at sub-optimal valuations.

Promoter/FII Holdings
Promoters held 74 per cent stake in the company as of Sept 30, 2020, while FIIs held 0.5 per cent, DIIs 19.6 per cent and public and others 5.9 per cent.