|Company Name||H.G Infra Engineering Ltd.|
|CMP||Rs. 277 | Buy below Rs. 350 [Current Price Rs. 350]|
|Category||Non-Premium | See bottom for details|
|Advisor Invested||Not Yet, but will be Investing|
H.G Infra Engineering
The company was started in 2003 as H.G. Infra Engineering Limited as an infrastructure company promoted by Shri Hodal Singh with 40 years of experience in the construction sector. Company have Infrastructure Projects focused in Highways, Roads, Bridges, Railways, Runways, Land Development & Water Pipeline Development.
The company focuses on projects with government and private sector mix. Few of the top clients include Indian Government, NHAI, MoRTH, Tata Projects, IRB and Adani Group. H.G is pre-qualified to bid independently for large EPC projects and HAM Projects and registered as a grade AA Class contractor with PWD, Rajasthan and an SS Category with Military Engineering Services (MES). They have invested in a broad base of construction equipment assets, including crushers, compactors, graders, loaders, pavers, mixers, dumpers, excavators, rollers, sprayers, compressors and tractors. This proprietary ownership has earned the trust of marquee clientele and enabled us to achieve a robust and growing order book and deliver quality construction while meeting urgent timelines.
Company have operations in 7 states in Rajasthan, Haryana, Uttar Pradesh, Maharashtra, Uttarkhand, Arunachal Pradesh & Telangana with a growing pool of skills and dedication of involving of people talent. The company is conscious in all the project journey in high quality & delivery excellence. Passion for Quality is a Key Differentiation for the company & It is proven in the NH projects undertaken.
The FY20 Revenue stands at Rs. 2180 Crore with Net Profit at Rs. 180 Crore. The company envisions itself to be the Most Admiring Infrastructure Player in India!
- EXPANSION Company is consistently Growing with Increasing Order Book involving GoI & Private Sector. Ongoing & Upcoming Projects would Reflect a 20-30% Increase in Revenue & Profits till FY25:
- Rewari Bypass, Haryana, Rs. 420 Crores
- Mancherial- Repallewada, Telangana, Rs. 950 Crores
- Gurgaon – Sohna, Haryana, Rs. 515 Crores
- NHAI, Narnaul Bypass, Haryana, Rs. 800 Crores
- Rewari-Ateli Mandi Upgradation, Rs. 488 Crores
- Plus, 5000 Crore more Projects
- NEW ARENA Company is Expanding from Road Constructions to Railways, Water Infrastructure & Airports. HG Infra is majorly an Engineering Procurement Construction (EPC) player with selective focus on Hybrid Annuity Model (HAM) projects.
- INFRASTRUCTURE SPENDING PUSH by Government of India would be an Accelerator for the Company’s Growth. India plans to spend US$ 1.4 trillion on infrastructure during 2019-23 to have a sustainable development of the country.
- INCREASING RESERVES displayed by the company proves excellent Financial Management. The reserves stand at Rs. 819 crore which is ample enough for upcoming Capacity Expansions.
- WIN-WIN ASSOCIATIONS is a core element of business growth. The company is having Win-Win association with Government & Private Sector Biggies like TATA, ADANI etc. This would help in the smooth streamlined acquisition & execution of projects with enough liquidity supplies.
- PROMOTER BUYING Promoters are holding high 75% of Shares & Increased the Holdings in Past 3 years. This reflects the Confidence in Long-term growth of the company.
- MUTUAL FUNDS INVESTED shows the credibility of the company so that strong hands are holding it. We see the MF PE Resizing Opportunity of 3X to be played in next 5 years timeline.
PROFIT & LOSS
The company demonstrated good CAGR growth in the past 5 year.
WARREN BUFFETT CHECKLIST
|History of Consistently Increasing Sales, Earnings & Cash Flow||Yes|
|Durable Competitive Advantage||Yes|
|Future Growth Drivers / Sector Growth||Moderate. Depends on Government Spending.|
|Debt Equity Ratio, Current Ratio||Moderate high Debt|
|Return on Equity must be Above Average||22%|
|Low CAPEX required to maintain current operations||No|
|Inventory Turnover Ratio, Debtor Days, ROCE||Flat|
|Management is holding / buying the stock||Promoter holding is at 74% & Increasing|
|Market Price < Intrinsic Value||At 72% Discount Intrinsic Value Calculator|
|Stock Price is consolidating (now)||Yes|
|Stock Price is growing in past years along with EPS growth||No|
|Consolidated PE, PB Ratio, PEG Ratio||PE 10, PB 2, PEG 0.4|
|Cash Flow Positive, Net Profit % greater than 8%||Cash Flow: +ve Profit: 30%|
|Paying Dividends, Tax||Dividends: Yes Tax: Low %|
|EPS Growth Rate||20% above past 3 years|
|Jump in Trailing Result EPS||No|
|Jump in Quarterly Result EPS||Yes, 50%|
|Expected Gain in 5 Years||300-500%|
|Price Movement Graph, 52 Week High & Low||Flat for past 5 Years due to High IPO Past Pricing while Revenues caught up recently.|
|Volume Analysis||50 Thousand|
|Power of Brand||Moderate|
|Corporate Governance, Reputation of Leaders||Okay|
- DEBT of the company stands at Rs. 510 Crore with Debt/Equity Ratio around 0.58. This is an alarming factor during tough recession times where the Cash Flow could be impacted with slow down in projects. However, this Risk is mitigated by robust order book & Higher QR earnings.
- FLAT PRICE GROWTH displayed by past 5 years would be concern. This was mainly due to the Post IPO High Pricing & Revenue Catchup took time.
- MANPOWER RISK Poaching of Experienced Skilled Laborers is a Threat to the Current Infrastructure Players. Company is working with Contractual Laws & Laborer Suppliers to mitigate this risk
- COVID TROUBLES are not ending as we foreseen before. As per Bill Gates & Top Economic Forecasts the Economy would take Past 2022 to restore to the full peak levels of 2019. This would cause slowdown in Infrastructure Growth & Spending there by causing Sluggishness in Revenue & Profits.
- COMPETITOR PRESENCE we have other competitors like Likhitha Infrastrudcture, J Kumar Infraprojects in the same line of business with H.G Infrastructure. However we see this as a Gated Entry area where there is only few Top Level players.
- TECHNOLOGY RISK Capital Intensive Upgrade of Technology & Equipment periodically is carving lot of Profits for the Company while ensuring the Apt ROI through Financial Excellence.
- GOVERNMENT SPENDING DEPENDENCY is a major concern for the company. We hope the next 5 years would be good for Indian Infrastructure are with handful of players gaining the core infrastructure projects.
Given the Facts & Analysis we recommend this company as a Multibagger in the order of 300-500% 5-bagger plus returns for a 5-year holding period.
Futurecaps Multibaggers are divided into 2 types for Ease of Investing:
- PREMIUM where you will get full-fledged report, tracking & updates. These companies will have more credibility & long term investment possibility due to low-debts, high promoter credibility etc.
- NON-PREMIUM where the company also possess multibagger properties, but there will be some violation on the quality factors of multibaggers like high-debt, non-growth sector etc. Updates will be provided.
Should I invest in Non-Premium?
The categorization is to Limit the Number of Multibaggers in your Portfolio. The recommended count of new stocks in 1 year is 5 – otherwise in a 5 year period your portfolio will become too huge. So it is up to the Investor to decide to invest in Non-Premium stocks or not.
Note: Investing & Portfolio Management is an Investor Decision & DO NOT Contact the Advisor for same as it will Bombard the Queries to Advisor & You have a Limit of 5 Free Queries per Year & Can Purchase Support after that. More on Portfolio Management.
Buying Strategy is 70-30 or 50-50 if you think a COVID Shutdown happens due to rising critical cases in India!
70-30 means you can Invest 70% in current price & accumulate remaining 30% when price crashes up to 30% levels.
50-50 means you can Invest 50% in current price & accumulate remaining 50% when price crashes up to 50% levels.
This would be a matured slow paced growing scrip. No aggressive price growths expected in next 1 year. Long-Term Investing of 5+ year with matured holding is required.
LONG TERM INVESTING
As you are aware, we are into Long-Term Value Investing. We don’t expect quick returns on stocks as that is not the purpose of stock market.
Real Stock Market Investing is about Wealth Creation using 500% 1000% 10000% kind of returns. For this we need to hold good stocks for long term as well as buy more of them during down times. This is how the Top Celebrity Investors like Warren Buffet become wealthy.
Largecap & Midcap-Smallcap have different Rallies – Once the Largecap rally is over the money will reach Midcap-Smallcap pushing it higher. So do not expect any quick move from here. Our commitment is 5 year 300-500%
You can read more at Gold Rules of Investing or join the master mind course at 50% discount to be a Pro Investor where you will get the Core 12 Lessons of a Value Investor!
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