H.G. Infra Engineering (HGINFRA IN) – Q2FY27 Result Update – Execution recovery and deleveraging remain key – ACCUMULATE

HG Infra reported a weak Q2FY27, with standalone revenue declining 23% YoY, alongside subdued EBITDA and PAT, primarily due to execution delays and land acquisition bottlenecks. Management expects a sharp H2FY27 recovery, retaining its FY27 revenue guidance of INR 60bn, implying H2 execution of INR 42bn (up 50% YoY) and EBITDA margins of 13–14%. For FY28, revenue is targeted at INR 70bn (+15% YoY), supported by improved execution across segments. The company also aims to reduce standalone gross debt from INR 16bn to approximately INR 9bn by FY27-end through asset monetisation and improved working capital collections. The order book stood at INR 137bn (3x book-to-bill), with FY27 order inflow guidance of INR 100–110bn, of which INR 55bn was secured in H1FY27. We estimate EPS growth of 29%/39% in FY28E/FY29E, driven by execution recovery, revenue ramp-up and margin improvement. We retain our Accumulate rating but revise our target price to INR 449 (from INR 662), factoring in a lower EPC valuation multiple of 5x. While the stock's valuation below book value appears attractive, we prefer to await further clarity on execution, particularly given the possibility of a weak Q3FY27, before turning constructive. Key catalysts include an execution ramp-up across the existing order book, monetisation-led debt reduction and improved working capital, driving stronger earnings growth and lower finance costs.