HG Infra Engineering IPO – What does experts say?
Last week, I wrote article about HG Infra Engineering IPO Review and said “Subscribe”. After our article, there were several analysts who gave neutral to positive recommendations about this IPO. Jaipur based HG Infra Engineering IPO would open for subscription on 26th February, 2018. HG Infra Engineering is one of the leading infrastructure construction, development and management company in India. With Govt of India focus in Infra sector, such companies would get benefitted in the next 2-3 years. In this article, I would provide some interesting insights/facts about this IPO. I would also provide what experts say about HG Infra IPO now.
About HG Infra Engineering Ltd
They are an infrastructure construction, development and management company with extensive experience in company focus area of road projects, including highways, bridges and flyovers.
HG Infra Engineering IPO Issue details
IPO opening date: 26-February-2018
IPO closure date: 28-February-2018
Face Value: Rs 10 per share
Issue price band: Rs 263 to Rs 270 per share.
Issue size: Approx Rs 457.7 Crores on higher price band
IPO Lot size: 55 shares and 55 shares there-off
Minimum investment: Rs 14,850
Leading Managers: SBI Capital Markets and HDFC Bank
Listing: BSE / NSE
Company Financials (reinstated-consolidated)
The company generated revenue of Rs 472.9 Crores for the year ended Mar-14 and Rs 1,058.5 Crores for the year ended Mar-17.
The company posted a profit of Rs 10.8 Crores for the year ended Mar-14 and profit of Rs 53.3 Crores for the year ended Mar-17.
Its FY17 EPS is Rs 9.87 and 3 years average EPS is Rs 7.65.
HG Infra Engineering IPO – Interesting Facts about this IPO
1) Companys revenues grew at 30% CAGR in the last 5 years. Investing in consistent growing companies would reward investors.
2) Company is generating around 5% consistent margins. Though the margins are on lower side which is any way expected in infra / construction companies, such consistent generating margins would provide to investors about future prospects of the company in terms of profits.
3) Govt of India has been focusing for a while about Infrastructure Development. This would boost the revenues of companies like HG Infra Engineering.
4) IPO Price of HG Infra Engineering is Rs 270 on upper price band where the asking P/E is between 27x to 35x. Its peers like PNC Infra was trading at 41x one month back and currently trading at P/E of 35x and Ashoka Buildingcon is trading at P/E of 23x. Hence, HG Infra IPO price of Rs 270 is reasonably priced.
HG Infra Engineering IPO – What does Experts say?
1) Centrum Broking comments about this IPO and says “"At this valuation, the issue seems fully priced. Given the mature valuations, investors can subscribe to the issue from a long-term perspective. It must be noted that, owing to the current market volatility and issue being offered at full valuation, it may cap listing gains".
2) Angel Broking gives neutral view and says that “post issue valuation is largely in line with industry average. In view of the limited track record (the company has grown enormously only in the last 2-3 years) and concentrated order book (over 95 per cent of order book concentrated in two states), we would like to see more consistent performance from the company in future."
3) ICICI Direct says “Subscribe to HG Infra Engineering Limited IPO” in its last week article.
4) Choice Broking talks about this IPO and says that issue price is fully priced, however considering the valuations, investors can subscribe to this IPO.
5) Motilal Oswal provides favorable review about this IPO and says that HF Infra Engineering is strong EPC player in the road sector and has excellent track record, and this issue attractively priced, hence recommending to “Subscribe” to this IPO.
6) Dilip Davda, SEBI registered analyst and IPO analyst comments about this IPO and says “Considering mega spending of around Rs 4.3 trillion on National Highways in next five years by the Central Government, this company is poised for a bright prospects. Being fully priced offer, investment may be considered for long term”.
7) Emkay Global Financial Services, Canara Bank Securities, IndSec Securities are also positive on this IPO.
What was our recommendation on HG Infra Engineering Limited IPO last week?
On the upper price band of Rs 270 and on consolidated restated FY17 EPS of Rs 9.87, P/E ratio works out to 27x. Even based on last 3 years restated consolidated EPS of Rs 7.65, P/E ratio works out to 35x. Means, company is asking higher price band of Rs 270 in the P/E ratio of 27x to 35x. There are listed peers like PNC Infra which is trading at P/E of 35x and Ashoka Buildcon at P/E of 23x, hence HG Infra Engineering share price is reasonably priced.
Company consolidated revenues grew at 30% CAGR in the last 5 years. It is earning consistent profits. Its issue price is also reasonably priced compared to the listed peers. Investors with 2-3 years time horizon can invest in this IPO. One may or may not get listing gains in this IPO.
Disclaimer: I have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
Readers, what is your view on this IPO? Do you feel one would get listing gains?
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HG Infra Engineering IPO – What does experts say