Buy HG Infra Engineering, target price Rs 337: HDFC Securities

HG Infra Engineering Ltd., incorporated in the year 2003, is a Small Cap company (having a market cap of Rs 1334.70 Crore) operating in Infrastructure sector.

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Promoters held 74.04 per cent stake in the company as of June 30, 2020, while FIIs held 0.42 per cent, DIIs 20.93 per cent and public and others 4.66 per cent.
HDFC Securities has given buy rating to HG Infra Engineering with a target price of Rs 337. The share price moved up by 3.65 per cent from its previous close of Rs 197. The stock’s last traded price is Rs 204.20.
HG Infra Engineering Ltd., incorporated in the year 2003, is a Small Cap company (having a market cap of Rs 1334.70 Crore) operating in Infrastructure sector.

Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 311.87 Crore, down 50.82 % from last quarter Sales of Rs 634.12 Crore and down -41.39 % from last year same quarter Sales of Rs 532.10 Crore Company has reported net profit after tax of Rs 19.93 Crore in latest quarter.
HG Infra-graph


Investment Rationale
While HG did not secure any orders during the quarter, it aims to win Rs 30-40bn during FY21. Order backlog is robust at Rs 68bn (3.1x FY20 revenue). Standalone net debt increased to Rs 2.7bn from Rs 2.5bn on Mar-20 as working capital nearly doubled to Rs 1.4bn from Rs 0.7bn on Mar-20.
Realization of receivables from Rajasthan project key for reduction in debt. The brokerage maintains BUY on HG Infra with a SOTP based target price of Rs 337/sh, valuing the EPC business at 10x FY22E EPS. Key risks: (1) slowdown in NHAI ordering and (2) delays in receipt of pending dues from the Rajasthan project.

Promoter/FII Holdings
Promoters held 74.04 per cent stake in the company as of June 30, 2020, while FIIs held 0.42 per cent, DIIs 20.93 per cent and public and others 4.66 per cent.
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