HG Infra Engg: Strong execution; healthy outlook

Recommendation: Buy

Target Price: Rs 915

Focus on diversification continues with the company exploring Ropeways and Logistics sectors as well. Management remains confident of 15-20% sustainable revenue growth and stable ~16% EBITDA margin.  

Very healthy execution at Ganga Express package from Adani

Backed by strong initial mobilization during preconstruction, HG Infra has achieved very healthy execution in the first four to five months for the 151.7km long Ganga Expressway project won from Adani. The company expects ~Rs2.6-3 billion revenue contribution from the project for Q4 and is targeting completion within 24 months versus the committed timeline of 27 months. This would enable bonus receipt of Rs500m for HG Infra. Payments from UPEIDA and Adani are running on time, with a 30-day payment cycle. 

Healthy Rs37 billion wins in Q4; focus on diversification continues

HG Infra ended 9MFY23 with an OB of Rs110.6 billion (2.8x book-to-bill). During Q4, the company has won two highway HAM projects with a BPC of Rs22.3 billion. It also forayed in Metro rail, Railways (lines and stations on EPC) with three wins totaling to Rs15.33 billion. Bid data suggests HG Infra has not been very aggressive. Management indicated that apart from Railways and Metro (one additional project p.a.), the company is looking to diversify into Ropeways and Logistics projects in small ways initially. 

Confident of 15-20% revenue growth over the medium term

While unseasonal rains may hurt Q4 execution and revenue guidance slightly, management reiterated 15-20% sustainable growth guidance over the medium term. Margins should also remain at ~16% given the sort of bidding discipline.