This infra stock with order book twice its m-cap tanks 40% from peak. Should you buy, sell, or hold?

Stocks to buy: H.G. Infra Engineering, which is engaged in the construction, development, design, and management of infrastructure projects, has seen its shares fall steadily in recent months amid heightened market volatility, causing shareholders to lose billions of rupees.

The stock, which was trading at ₹1,880 apiece in July 2024, is now valued at ₹1,117 apiece, resulting in a crash of 40.60% over the past 10 months. However, the company's order book has expanded significantly during this period, and its diversified revenue streams have led analysts to remain bullish on the stock despite the steep fall.

The company specialises in delivering integrated design, engineering, procurement, and construction services. It has successfully executed key capital projects and undertaken infrastructure asset maintenance through strategic partnerships and long-term alliances.

Order book higher than market cap

During 9MFY25, the company secured projects worth ₹8,200 crore, followed by additional orders worth ₹2,195 crore in Q4FY25. As of December 31, 2024, the total order book stood at ₹15,080 crore, equivalent to 3x its FY24 revenue.

A significant portion—94%—of these projects is attributed to the Government of India, with the remaining 6% from the private sector, ensuring strong revenue visibility for the next 2–3 years.

Notably, the current order book of the company is more than twice the company’s market capitalisation of ₹7,284 crore as of April 16. 

Traditionally focused on roads and highways, the company has successfully expanded into the railways and solar sectors, securing multiple orders in these segments. These now contribute 25% of the total order book, reducing its dependence on a single sector.

Domestic brokerage firm Axis Securities expects the company to deliver strong performance in Q4FY25 and anticipates a 15%, 12% and 15% CAGR in revenue, EBITDA, and PAT, respectively, over FY25–27E.

Meanwhile, the company’s management expects 35–40% of the order book to come from non-road projects over the next 2–3 years. Additionally, it aims to secure ₹10,000–12,000 crore in new orders in FY26.

The management is also exploring opportunities in the transmission sector, particularly in Tariff-Based Competitive Bidding (TBCB) projects, which are similar in structure to EPC projects. This diversification and sectoral expansion are expected to support the projected revenue growth.

Target price and outlook

Given the strong order book and focus on diversifying revenue streams, Axis Securities has retained its 'buy' rating on the stock with a target price of ₹1,201 apiece, implying a 7.5% upside from the stock's current market price.

Earlier in March, Geojit Financial Services, has also retained its 'buy' rating on the stock with a target price of ₹1,440 apiece. The brokerage stated that increasing opportunities in road, railway and solar projects, along with a current order backlog at 3x TTM revenue, ensure strong business visibility.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.