FII buying lifts this infra stock 78% in a month; over 5 years, it's up 23,000%

Hazoor Multi Projects works as a sub-contractor in executing various national highway road projects awarded by government authorities.  (Mint)
Hazoor Multi Projects works as a sub-contractor in executing various national highway road projects awarded by government authorities. (Mint)

Summary

  • Hazoor Multi Projects is reaping the benefits of a heavy order book, which has drawn the attention of foreign investors to the stock

The return of foreign investors is a huge positive that could send Indian stock markets to record levels. You see, the Indian stock market is very reliant on money coming in from domestic investors. But when foreign money also comes in, the double-effect could result in individual stocks shooting up in no time.

One such stock that has hogged the limelight these days is Hazoor Multi Projects.

In merely a month, the company’s share price has shot up by a massive 78%.

So far this year, the shares are up 254%.
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So far this year, the shares are up 254%.

FII buying powers stock to multi-year peak

First a little background.

Hazoor Multi Projects was initially engaged in the construction of residential projects. During the pandemic, however, the company changed its line of business to infrastructure development. It currently works as a sub-contractor in executing various national highway road projects awarded by government authorities.

Coming to its recent rally, Hazoor Multi Projects recently informed the exchanges that it had allotted preferential shares to further accelerate growth in its business.

In this preferential allotment, Mauritius-based foreign institutional investors also picked up stake in the company.

FII holding in Hazoor Multi Projects incresed from nil in March to 1.36% in June, and further to 5.29% in September.
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FII holding in Hazoor Multi Projects incresed from nil in March to 1.36% in June, and further to 5.29% in September.

Typically, FIIs buying into the counter could be due to various factors. But in the case of Hazoor Multi Projects, it could be because the company is sitting on a heavy order book that provides strong revenue visibility for years to come.

Order book higher than market cap

A good way to analyse a company’s growth prospects is to compare its order book with its current market capitalisation.

A large order book relative to a smaller market cap may indicate undervaluation and strong future earnings, while the opposite scenario could signal overvaluation or operational inefficiencies.

In November, Hazoor Multi Projects won orders worth Rs1,130 crore to upgrade and rehabilitate a section of NH-66 in Ratnagiri. The work was given to Hazoor Infra Projects (a wholly owned subsidiary).

The estimated value of the project is Rs1,130 crore divided with annuities at Rs520 crore, interest on annuities at Rs460 crore, and operation and maintenance costs at Rs140 crore.

When it received this order, Hazoor Multi Projects’ market cap was at Rs200 crore, which has now shot up to Rs390 crore.

What is next

Now, we must not read too much into all this because the company has a limited track record of operations. Before the pandemic, Hazoor Multi Projects was not generating revenue, and has just posted a turnaround.

Hazoor Multi Projects' heavy order book provides strong revenue visibility for years to come.
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Hazoor Multi Projects' heavy order book provides strong revenue visibility for years to come.

On the plus side, Hazoor Multi Projects started to get orders from government authorities in 2022 and 2023.

It also reduced its debt in FY23. The company’s board recently approved a rights issue for up to 45 crore.

The recent order worth Rs1,130 crore was Hazoor's highest ever, which has given a big boost to its earnings prospects.

Going forward, too, the government could award highway-related projects to the company as India is transforming in a big way when it comes to infrastructure.

The government is also looking to boost other sectors such as cement, steel, automobile, and real estate, as it seeks to lift India’s economy to $5 trillion in a couple of years.

FIIs buying into the counter for the past two quarters just makes its case much stronger.

FII holding in Hazoor Multi Projects went up from nil in March to 1.36% in June, and further up to 5.29% in September.

The December shareholding pattern would reflect even higher FII holding owing to the preferential shares that the company recently allotted.

It remains to be seen how the company performs in the coming months. Order execution would be key if it needs to receive more such projects.

Share price performance

Over the past five days, the stock has gained 22%, while over the past month, it has rallied 78%.

In 2023 so far, its shares are up 254%.

If we go back 5 years, shares of the company were trading at Rs1. Today, they’ve shot up to Rs258 apiece, translating to gains of over 23,000%.

Five years ago, Hazoor Multi Projects shares were trading at Rs1 apiece. The stock has since gained over 23,000%.
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Five years ago, Hazoor Multi Projects shares were trading at Rs1 apiece. The stock has since gained over 23,000%.

At its current price, shares of Hazoor Multi Projects are trading at a price-to-earnings multiple of 5.8x, compared to its 3-year average of 12.5x and its 5-year average of 11.7x. 

Hazoor Multi Projects has performed far better than its peers in the infrastructure space.
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Hazoor Multi Projects has performed far better than its peers in the infrastructure space.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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