Buy HG Infra with a price target of Rs 800, says Emkay Global
As against the current market price of Rs 535, Emkay has set a target of Rs 800 on the stock of HG Infra in the next 12-months.
According to Emkay Global, HG Infra started its journey as a sub-contractor to some of the renowned EPC players in the country and has now become one of the leading EPC players with a portfolio of HAM projects.
Sub-contracting, which accounted for 75% and 50% of revenue in 2012 and 2017, now contributes less than 25%. HG Infra has increased its pre-qualification to Rs 28 billion from Rs 15 billion a few years back, the brokerage has said.
According to the brokerage, the medium-term growth prospects high in road sector.
“Investments in the road sector during FY21-FY25 are expected to be 1.6x investments made during FY16-FY21 as per industry estimates. EPC opportunities in water, railways and urban infrastructure are large and, hence, diversification efforts will pay off in the long term,” the brokerage has said.
“We estimate a 24% EPS CAGR over FY21-FY24, aided by order wins in both EPC and HAM as HG Infra can now bid for a majority of large road projects. We initiate with a target price of Rs 800, valuing the EPC business at 13 times Sep’23E EPS of Rs 59. Peers are trading in the 9-17 times range with a 500-700 basis points lower RoE,” the brokerage has said.
Buy Bharat Forge
Emkay Global has set a target price of Rs 928 on the stock of Bharat Forge, as against the current market price of Rs 819.
“Our positive view on Bharat Forge is underpinned by its leadership position in automotive forgings, focus on diversification and expected recovery in the core segments. Medium term performance should be aided by new segments such as Defense, Railways, Aerospace, E-mobility, and Light-weighting solutions,” the brokerage has said.
According to the brokerage the management commentary was positive as it expects sequential revenue growth in Q2FY22. Apart from this Oil & Gas revenues stood at Rs1.5 billion in Q1 vs. Rs 450 million in Q4FY21. The company Expects revenue momentum to continue for the next few quarters. In fact, the management expects aluminum forging revenues for overseas subsidiaries to more than double in the next three years.
“We retain Buy with a revised target price of Rs 920, based on 27 times price to earnings for the standalone business on Sep’23E EPS (Mar’23E EPS earlier),” the brokerage has said.
The article is informational in nature, which is taken from the brokerage report of Emkay Global. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.