The ‘Fundamentally strong’ nature of a company is seen when it possesses some key points with regard to its operations, debt levels, etc. Such companies enjoy the luxury of strong financial numbers and ratios and have the ability to survive in a scenario of financial distress faced by their peers in the industry.
Herein this article, we will analyze one such fundamentally strong company which is listed below:
H.G. Infra Engineering Limited
Incorporated in 2003, H.G. Infra Engineering Limited (HGIEL) is primarily engaged in the business of construction of infrastructure projects like roads, highways, and bridges. The Company also executes civil construction projects like railways & land development, extension & grading of runways, as well as water pipeline projects. It has a strong presence in several Indian States such as Maharashtra, Rajasthan, Uttar Pradesh, etc.
The company has a market capitalization of Rs 6,190 crores and its stock closed at a price of Rs 950.
As per the latest quarterly financials of the company, the basic operational metrics such as the operating revenues and net profits have increased in recent financial years. The operating revenues moved up from Rs 1,185 crores in Q3 v/s Rs 1,535 crores in Q4 and the net profits, during the same period, went up from Rs 131 crores to Rs 171 crores.
On a yearly basis as well, the company has been able to report decent growth with operating revenues increasing from Rs 3,751 crores during FY21-22 to Rs 4,622 crores in FY22-23 and net profits moving from Rs 380 crores to Rs 493 crores.
Having a look at some important ratios, the return on equity (ROE) has consistently increased in the last couple of years with the most recent shift being from 25.06 percent during FY20-21 to 30.42 percent in FY21-22. Moreover, the return on capital employed (ROCE) too has shown an upside movement from 25.61 percent to 28.43 percent keeping the timeframe the same.
The net profit margin of the company also grew on a continuous basis with the recent shift marked from 9.07 percent in FY20-21 to 10.13 percent in FY21-22. The debt-to-equity ratio, though within the desired limits, has increased from 0.72 to 0.82 during the same period.
Having a positive outlook for the company, YES securities gave a ‘Buy’ tag with a target price of Rs 1,202 indicating an upside of 26 percent as compared to the current price levels.
The rationale behind giving such a recommendation is the favorable order book, working capital cycle, geographical diversification, etc.
The shareholding data reveals the promoters hold a 74.53 percent stake in the company, and Foreign Institutional Investors (FIIs), on the other hand, hold a 1.34 percent stake in the company.
Written by Amit Madnani
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
