HG Infra Q2 Results Review

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HG Infra Engineering Ltd. reported weak but largely in-line earnings. Profit after tax declined 7.5% YoY to Rs 646 million (estimate: Rs 630 million) due to lower margins/higher interest costs.

Revenue was flat YoY at Rs 7.5 billion (our estimate: Rs 8 billion) as only 52% of the backlog was executable at start of Q2.

HG infra has lowered its revenue guidance from Rs 50 billion to Rs 46 billion for FY23 due to delay in receipt of appointed dates for key projects.

After receipt of these clearances in Q3 FY23, HG Infra’s entire backlog of Rs 109 billion has now become executable (H2 implied revenue growth of 38% YoY).

Gross debt reduced by Rs 553 million QoQ to Rs 3.9 billion in September 2022 and HG Infra expects the debt to remain at similar levels by March 2023.

The company has received three offers for monetisation of four hybrid annuity models (provisional commercial operations date received for three HAMs; equity investment at Rs 3.5 billion)and expects valuation of 1.3-1.4 times price/book.

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