HG Infra Engineering Ltd - Q1FY21 Result Update - YES Securities

BUY (Target Rs282, Upside 47.0%)

HG Infra Engineering reported topline de-growth of 43.4% yoy (~Rs.3.0bn) which was impacted due to COVID-19 related shutdown. Operating margin, however, remained at an elevated level of 16.5% (+138 bps yoy) led by higher contribution from better margin HAM projects. PAT stood at Rs.151mn (-56.1% yoy). At the end of Jun'20, HG Infra's order book stood healthy at ~Rs.68bn (3.5x TTM revenues). The company has not won any major projects during YTD FY21. However, the management seems confident of securing orders worth ~Rs.35bn during FY21. The company is currently running at ~70-80% efficiency levels. Also, labor strength across project sites have improved to 80%+ of the pre-Covid levels. With this, the management expects operations to get normalized by Sept'20-end.

Faster than expected re-mobilization of labor is likely to aid company in ramping-up operations. Also, timely receipt of appointed date in pending HAM projects would support execution in H2 FY21. We have largely retained our revenue estimates for FY21 and FY22, and we believe the company is well placed to speed up execution as COVID related impact settles. We have however increased our operating margin estimates to 15% (in FY22) with better project mix. Decent balance sheet position provide comfort. We maintain our BUY rating for revised target of Rs.282 (Based on SOTP valuation).

Shares of H.G. Infra Engineering Ltd was last trading in BSE at Rs.192.75 as compared to the previous close of Rs. 191.9. The total number of shares traded during the day was 102599 in over 128 trades.

The stock hit an intraday high of Rs. 202.9 and intraday low of 192.1. The net turnover during the day was Rs. 19817116.

Source : Equity Bulls

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