HG Infra Engineering: Target Price Revised to Rs 670 by Prabhudas Lilladher

HG Infra Engineering Sees Recovery in Q2FY27, Despite Weak Q4FY26 Performance

HG Infra Engineering reported a disappointing fourth quarter of fiscal year 2026, with standalone revenue, earnings before interest, taxes, depreciation, and amortization (EBITDA), and profit after tax (PAT) declining by approximately 31%, 55%, and 55% year-over-year, respectively. This decline was primarily attributed to slower project execution and subdued order inflows throughout fiscal year 2026.

In an effort to bounce back, the company's management team is expecting a recovery in the second quarter of fiscal year 2027, driven by improving execution, claim settlements, and the ramp-up of recently awarded projects. Additionally, HG Infra Engineering has outlined a deleveraging roadmap, with standalone debt expected to decrease from approximately INR 16.3 billion to INR 8-10 billion by the first half of fiscal year 2027. This reduction in debt is expected to be achieved through the monetization of high-asset-value (HAM) assets, debt drawdowns from solar projects, and normalization of working capital.

Despite the expected recovery, HG Infra Engineering's order book visibility remains healthy at approximately INR 157 billion, following the company's wins in the first quarter of fiscal year 2027. The company's diversification into transmission, battery energy storage systems (BESS), and renewable energy continues to broaden its business mix beyond roads.

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Recommendations and Outlook

Given the company's current valuation of approximately 10 times its fiscal year 2028 estimated earnings per share (EPS) and 1 times its book value, HG Infra Engineering's valuations are approaching COVID-era lows. Based on this analysis, we are retaining our Accumulate rating with a sum-of-the-parts (SOTP) base target price (TP) of INR 670. This valuation is based on an 8 times fiscal year 2028 EPS valuation for the engineering, procurement, and construction (EPC) segment and a book value (BV) valuation for the company's investments.

Key catalysts for a re-rating of HG Infra Engineering include stronger order inflows and successful asset monetization leading to a meaningful reduction in debt. However, execution is likely to remain subdued through fiscal year 2027.