HG Infra Engineering Ltd. share price target

Robust Order Book Aiding Consistent Growth: HG Infra has reported its Q1FY20 results broadly in line with our estimates. EBITDA margin has expanded by a marginal 21 bps to reach 15.1% for Q1FY20 on account ofhigher turnover (16.9% YoY growth) and lower material expenses (43.2% vs 50.1% as a % of sales).

HG delivered an inline performance during 1QFY20. The NWC days remained stable at 100 as Rajasthan State project contributed 38%/33days to debtor days. HG expects to realize it soon and revert to 60-65days of NWC. About Rs 23bn of orders will move into execution from 3QFY20-end, leading to a strong pickup in revenue from 2HFY20. The EPC bid pipeline is robust (HG plans to bid for ~Rs 500bn in EPC and selectively in HAM, post FC of 2 HAM). HG has received term sheet for 2 HAM projects and FC will get announced in Sep-19. We maintain BUY. Key risks (1) Slowdown in NHAI ordering; (2) High interest rates; and (3) Delay in appointed dates for HAM. HG Infra reported Rev/EBIDTA/APAT beat of (8)/(6.1)/0.1% vs our estimates. Higher EBIDTA margins (+30bps vs estimate), stable interest cost/depreciation resulted in inline profits. We maintain BUY on HG with SOTP of Rs 462/Sh, valuing the EPC business at 15x FY21E EPS.

HG Infra's (HGIEL) Q1FY20 revenue grew 17% YoY to Rs 5.3bn but was below estimates due to delayed AD award for the Hapur-Moradabad project.

HG Infra Engineering (HGINFRA) has reported a better-than-expected performance in 1QFY20 despite a marginal misses on revenue front, which grew by 17% YoY to Rs5.26mn (vs. our estimate of Rs5.35bn). While EBITDA grew by ~19% YoY to Rs795mn, EBITDA margin stood at 15.1% (+21bps YoY and -96bps QoQ) vs. our assumption of 15%. Higher-than-estimated margin and lower finance cost led to better-than-estimated 27% YoY growth in PAT to Rs344mn (vs. our estimate of Rs312mn). Having secured orders worth Rs36.5bn in FY19 (EPC components), HGINFRA did not bag any order in 1QFY20 due to slowdown in ordering activities. Order backlog stands at Rs57.1bn (2.7x of TTM revenue) as of 1QFY20-end vs. Rs62.2bn in FY19. Further, gross borrowings...

Mahindra & Mahindra (MM) clocked a 6% YoY rise in Q4FY19 standalone revenue to Rs 140bn, with realisations up 6% despite stagnant volume growth. EBITDA declined 6% YoY to Rs 16.5bn but came in above our estimate, as did margins at 11.7%. Adj. PAT was broadly in line, dipping 9% YoY to Rs 9.3bn. We trim FY20/FY21 earnings estimates by ~2% each to build in softer volumes and also pare our target core P/E multiple from 14x to 12x. Upon rollover to Mar'20, our TP remains at Rs 760....

HG delivered a strong performance during FY19. The focus should now be on debt reduction. There has been a marginal deterioration in NWC days owing to increase in FY19 debtors even as HG expects to realize it soon and revert to 65days of NWC. ~Rs 12/27bn of orders will move into execution from 1QFY20-end/3QFY20 leading to a strong pickup in revenue from 2HFY20. Hapur project's AD is expected to come in the next 15days. The EPC bid pipeline is strong (HG plans to bid for ~Rs 250bn in EPC and selectively in HAM) and it stands to benefit from the upcoming ordering in the roads segment (incl. State projects). We maintain BUY. Key risks (1) Slowdown in NHAI ordering; (2) High interest rates; and (3) Delay in appointed dates for HAM. We maintain BUY on HG with SOTP of Rs 462/Sh, valuing the EPC business at 15x FY21E EPS. We have marginally cut our FY20/21E EPS by 0.7/0.3% to factor in higher interest costs as share of interest bearing mobilization advances increase in the mix.

View: Growth momentum to continue; maintain Buy HGINFRA posted a 15.1% YoY growth in revenue in Q4FY19 (highest quarterly revenue in its history) to `5.8 bn (11.6% below our estimate), due to muted execution. The EBITDA margin was up 46 bps YoY to 16.1% (116 bps above our estimate), primarily due to a lower construction cost at 76.6% of revenue, which was partially offset by higher employee and other expenses. The PAT was up 2.1% YoY to `367 mn (19.5% below our...

Refer to important disclosures at the end of this report An emerging pure-play EPC player; Disciplined execution, healthy order book, and strong client reputation the hallmarks of a strong franchise This report is solely produced by Emkay Global. The following person(s)...

Maintain BUY with Rs 408/sh TP. HG Infra Engineering Ltd. (HG) posted strong revenue/EBITDA/PAT at Rs 5.5/0.8/0.4bn respectively (~7/6/7% estimate beat). Stable EBITDA margins at 14.6% are comforting while management believes there is scope for a further 100bps uptick from here as share of own orders increase in mix.

We have upgraded FY19/20E EPS by 11.9/9.4% and increase TP to Rs 399/sh(vs. Rs 366/sh earlier). Maintain BUY. HG Infra Engineering (HG) reported robust execution of Rs 4.3bn in 2QFY19 (+82% YoY, -5% QoQ, 2% miss). Stable EBITDA margins at 14.5% are comforting while management has guided for a further 100bps uptick from here. PAT came in at Rs 246mn a miss of 6.9%.