This post on HG Infra Engineering IPO tries to bring out consolidated brokerage views opinions, IPO Review / Analysis, Note/ reports and recommendation of brokerages , Analyst, Business New papers, Management views, Grey Market Premium, Subscription etc on HG Infra Engineering IPO and shall be updated continuously till the closure of the issue. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to HG Infra Engineering IPO or not.
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Complete Anchor List
Anchor Investors (AIs) portion in the Public Issue of HG Infra Engineering Limited (HG Infra IPO), for 5,133,150 equity shares have been subscribed today by 11 AIs at Rs.270/- per equity share. The anchor investors includes names like SBI Infrastructure Fund, DSP BlackRock India Tiger Fund, UTI – Infrastructure Fund and IDFC Infrastructure Fund.
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Consolidated opinion of Brokerages, Analysts, Business New Paper Reports, Management Views on HG Infra IPO .
Angel Broking: “At the upper end of the price band, the P/E multiple works out to be 27x (pre issue equity base) and 33x ( post issue equity base) its FY17 EPS. This post issue valuations is largely in line with industry average valuations and 10-30% discount from valuation of industry leaders like Dilip Buildcon and KNR construction. However, 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% of order book concentrated in 2 states), we would like to see more consistent performance from the company in future. Hence, we recommend ‘Neutral’ on the HG Infra IPO. “
Capital Market: ” Score 44/100, The diluted equity share capital at the upper price band of Rs 270 stands at Rs 65.17 crore of face value of Rs 10. Thus, EPS is Rs 7.6 for FY 2017. The P/E on FY 2017 earnings works out to 35.7. “
Choice Broking:“ On valuation front, at higher price band, the company is demanding a P/E valuation of 33x (to its restated FY17 EPS of Rs. 8.2) as compared to peer average of 33.8x. Though the issue seems to be fairly priced with respect to FY17 earnings, it look attractive considering the FY18E and FY19E earnings. (The company is asking a P/E multiple of 19.6x and 12.7x, respectively, for FY18E and FY19E, as compared to peer average of 21.5x and 18.4x). On other valuation metric front too, the company is demanding a discounted valuation with respect to FY18E and FY19E financials. Thus considering the above observations, we assign a “SUBSCRIBE” rating for the HG Infra IPO issue.”
India Infoline: “The company has earned early project completion bonus due to its remarkable execution capabilities and currently operates at decent double-digit operating margins. Post utilization of IPO proceeds, amid a declining debt, company would also qualify to the bid for largest project as single bidder. Additionally, it also use part of proceeds towards equipment purchase. Consequently, profitability would improve.”
Nirmal Bang: “Over the last four years (FY13-17), the company has demonstrated good execution skills with revenues growing at 34% CAGR, one of the
highest in the listed space. During this period, the company successfully transformed from being a sub contractor to a prime contractor. The company is now entering the big league with its consistently expanding pre-qualification capability which currently stands at ~Rs. 900 Cr for EPC projects. By sticking to EPC projects historically and avoiding BOT and HAM, the company ensured that it utilizes its capital optimally which is evident from the company’s best in class return ratios. With an order book of Rs. 3708 Cr (3.5x FY17 Sales) the company offers stronggrowth visibility for coming years. At the given upper price band of Rs. 270, HG Infra Engineering is being offered at PE of 35.7x / 30.0x its FY17 / H1FY18 annualised EPS and EV/EBITDA of 16.2x / 13.2x its FY17 /H1FY18 annualised EBITDA. We recommend subscribing to the issuefrom a long term perspective.”
SMC : “Rating 2.5/5 Considering the P/E valuation on the upper end of the price band of Rs. 270, the stock is priced at pre issue P/E of 24.93x on its annualised FY18 EPS of Rs. 10.83. Post issue, the stock is priced at a P/E of 30.05 x on its EPS of Rs. 8.98. Looking at the P/B ratio at Rs. 270 the stock is priced at P/B ratio of 7.11x on the pre issue book value of Rs.37.95 and on the post issue book value of Rs. 82.01 the P/B comes out to 3.29x. “
SP Tulsiyan website: “Historic growth, good order book offering revenue visibility and Govt’s healthy push to the road sector, all bode well for the stock. However, high debt and geographic concentration in just 2 states coupled with current sentiments of secondary markets, pricing is not viewed to be very attractive. Hence, advice would be to either wait for 12-15% lower levels pots listing or evaluate financial performance over the next few quarters before taking a call on the stock.“
SPA Securities: “The revenue/EBITDA of HGIL has grown at a CAGR of 30.8%/33.2% from FY14 to FY17. EBITDA margin expanded by 60 bps over FY14- 17 to 11.4% in FY17. PAT has grown at a CAGR of 69.8% in the same period with expansion in PAT margin by over 270 bps over FY14-17. At higher price band, the company is demanding a P/E valuation of 33x its restated FY17 EPS of INR 8.2. ROE for FY17 stood at ~36% with leverage of just 0.9x. With repayment of debt, interest expense is expected to come down by 70-80% while fortified balance sheet will help HGIL to improve its order book further. Thus considering the above observations, we assign a “SUBSCRIBE” rating for the issue.”
SSJ Finance: “H G Infra has reported a CAGR of 30.8% and 42.1% on revenue and net profit fronts respectively over FY2014-2017. On its upper band of price of Rs 270, the issue is priced at PE ratio of 24.9x of its H1FY2018 annualised EPS of Rs 10.8. We believe IPO is overpriced leaving little for investors. Hence, we recommend to Avoid the IPO.“