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Home / Markets / Stock Markets /  Why Emkay sees more upside on multibagger stock that has rallied over 188% this year
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Brokerage house Emkay's recent interaction with HG Infra Engineering’s management has quite positively refined its outlook on the business, built upon strong execution in H1FY22. The company's management, led by healthy delivery, recently upgraded its outlook for sales/EBITDA and order inflows. In addition, the management sees a 20%+ sales CAGR for the next two years as quite achievable.

The brokerage firm has a Buy rating on multibagger stock HG Infra that has rallied over 188% this year (year-to-date or YTD) so far. It has a target price of 820 with a time frame of around twelve months. 

“Robust awarding activity in the road space, superior order winning ability, cost-cutting digital initiatives, long-term diversification efforts and margin stability despite inflation support our positive outlook on the company. We estimate a 16% EPS CAGR for FY22-24, in line with consensus expectations," Emkay's note stated.

The company has guided for further order inflows of around 22 billion in H2, led by high awarding activity by the NHAI, as well as incremental inflows in new business areas, such as Railways/Water Supply, for which the bidding has been undertaken through JV partners. These non-road projects are spread across Gujarat, Rajasthan and Madhya Pradesh, and carry a similar operating margin profile as the current business segment, the brokerage highlighted.

"The impressive performance in the last few quarters has led to ~20% upgrade in FY22/23E EPS by the Street in the last six months, bringing consensus forecasts in line with our optimism," Emkay further added on its note on HG Infra.

Though, key risks as per the brokerage include significant slowdown in awarding activity across road/non-road segments, margin impact from commodity inflation in H2 and HAM monetization at sub-optimal valuations.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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