HG Infra Engineering Ltd: Targets ₹11,000 Cr Order Book for FY26, Stock Undervalued

HG Infra Engineering Ltd: Targets ₹11,000 Cr Order Book for FY26, Stock Undervalued

How India’s infrastructure powerhouse is leveraging sectoral diversification and robust execution to fuel growth, even as its stock remains undervalued.

Introduction
HG Infra Engineering Ltd (HG Infra) has emerged as a key contender in the Indian infrastructure landscape, especially in roads, highways, railways, and solar projects. With a proven track record of consistent growth, the company is eyeing a substantial order inflow of ₹11,000 crore for FY26. Yet, the market seems to be discounting its prospects, with the stock price hovering around ₹1,076—down nearly 43% from its 52-week high. What’s driving this disconnect, and does it present an opportunity for investors?

Order Book Strength and Growth Ambitions
HG Infra’s management has articulated a clear strategy for growth. For FY26, the company is targeting ₹11,000 crore in new orders, with approximately 70% expected from roads and railways, and the remaining 30% from other sectors such as solar and metro projects. This ambitious target is backed by a robust bid pipeline, especially in National Highways Authority of India (NHAI) projects, where the company has already submitted bids worth ₹16,000 crore and is eyeing opportunities in an ₹80,000 crore pipeline.
The order book is well-diversified:
• Roads and highways: ₹11,452 crore (approx. 73%)
• Railways and metro: ₹2,498 crore (approx. 16%)
• Solar: ₹1,691 crore (approx. 11%)
This diversification reduces dependency on a single segment and positions the company to benefit from India’s multi-sector infrastructure push.

Financial Performance and Operational Highlights
HG Infra has delivered impressive financial results, underpinned by strong execution and operational efficiency:
• Q1 FY2025 revenue: ₹1,528 cr, up 13.1% y-o-y
• Q1 FY25 EBITDA: ₹312 crore (margin of 20.44%)
• Q1 FY25 PAT: ₹163 crore (margin of 10.6%)
The management has maintained guidance for 17–18% revenue growth and EBITDA margins of 15–16% for FY25 and FY26. The company’s five-year revenue CAGR stands at over 20%, with sustained operating margins and a healthy order book-to-bill ratio of nearly 3x.
On the balance sheet front, HG Infra remains disciplined. The company has infused ₹728 crore into Hybrid Annuity Model (HAM) projects, with a further ₹425 crore planned for FY25 and the balance in FY26–27. Solar project equity requirements are also being met through internal accruals and asset monetization.

Sectoral Diversification and Future Prospects
Traditionally focused on roads and highways, HG Infra has successfully expanded into railways, metro, and solar segments. These now constitute a quarter of its total order book, reducing sectoral concentration risk and opening new revenue streams.
The company is also exploring opportunities in water infrastructure and transmission projects, particularly under the Tariff-Based Competitive Bidding (TBCB) model, which leverages its EPC expertise. This sectoral expansion is expected to support a 15% CAGR in revenues over FY24–26.

Market Valuation: Discounted Opportunity?
The current market capitalization stands at ₹7,012 crore. Over the past five years, the stock has delivered a stellar 433% return, yet recent corrections have created an apparent value gap.
Analysts remain bullish, with target prices ranging from ₹1,720 to ₹1,885, reflecting confidence in the company’s growth trajectory and execution capabilities. The substantial promoter stake (exceeding 71%) and strong institutional participation further highlight investor trust.

Challenges and Risks
While the outlook is positive, investors should be mindful of potential risks:
• Policy changes or delays in government project awards
• Rising input costs impacting margins
• Competitive intensity in the EPC sector
The company’s focus on operational efficiency, prudent capital allocation, and sectoral diversification are key mitigants to these risks.

Conclusion
With a robust and diversified order book, ambitious growth targets, and disciplined execution, the company is well-positioned to capitalize on India’s infrastructure boom. The current market discount offers a compelling entry point for long-term investors seeking exposure to the sector. However, as with all investments, a close watch on execution and macroeconomic developments is warranted.

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