HG Infra shares surged by more than 5% following the company’s acquisition of a ₹447 crore order from South Central Railway

HG Infra Engineering, known for its expertise in constructing, developing, designing, and managing diverse infrastructure projects, saw its shares rise for the fourth consecutive trading day on Monday. The stock gained 5.4% to reach ₹972.40 per share.

Today’s surge can be credited to the company’s recent acceptance of a ₹447.11 crore contract from South Central Railway on Saturday. The Letter of Acceptance (LoA) involves the doubling of track project, which encompasses electrification and signaling work, between Karanjgaon station as part of the Aurangabad Ankai Doubling Project in the Nanded Division of South-Central Railway.

Last Friday, HG Infra Engineering was named as the top bidder (L-1 bidder) by East Central Railway for constructing a double-line track (3rd & 4th line) in the Gaya-Son Nagar section of the DDU Division in Bihar. This project encompasses various tasks such as earthwork, bridges, electrification, and other miscellaneous work, totaling ₹709.11 crore.

In a recent report, Axis Securities, a brokerage firm, maintains a favorable view on the company, citing its strong execution capacity, substantial order book, sound financial position, and impressive return ratios.

As of the end of the third quarter, the company holds a strong order book valued at ₹9,623 crore. This consists of 51% from EPC road projects, 37% from HAM road projects, and the remaining 12% from railway & Metro projects.

Axis Securities stated that the increased Capex outlay for the Roads & Railways sector in the 2024–25 Interim Union Budget is creating substantial opportunities for companies like HG Infra to enhance infrastructure development in the country.

To seize these expanded opportunities, HG Infra is branching out into segments beyond roads, including railways, metro, and solar projects. The company expects that 20%–25% of its revenue will originate from these non-road segments.

The bidding pipeline remains strong, encompassing roads, JJM (Jal Jeevan Mission), and railway sectors. Management anticipates an order inflow of ₹5,000–6,000 crore in FY24, with EBITDA margins ranging from 15.5% to 16%.

As per the brokerage, the company has finalized the HAM (Hybrid Annuity Model) asset monetization of three Special Purpose Vehicles (SPVs), with the remaining SPV expected to be completed by March 2024. This accomplishment signifies a significant milestone for the company, demonstrated by the completion of the first batch of three SPVs.

On November 21st, 2023, the company transferred its entire stake to Highway Infrastructure Trust. The completion of the HAM asset monetization is seen as a positive step for the company, noted the brokerage.

Axis Securities expects the company to achieve revenue, EBITDA, and PAT growth at a CAGR of 17%, 16%, and 15% respectively over FY23–25E. They recommend a ‘BUY’ rating on the stock with a target price of ₹995 per share.

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