HG Infra looks like an interesting investment opportunity but I am still trying to better understand the sector as whole. Is the high consolidated operating margins of about 20% the industry norm? The Consolidated operating margins of about 20% are higher than the stand alone margins of about 16-17%. Is it correct to presume that margins under HAM business are considerably higher than EPC?
The valuations appear to be low, when one considers that it is a two decade old company, with high promoter holding of about 75% and decent institutional names holding a good amount of the balance. With the ongoing Govt. thrust on the infrastructure sector, there ought to be plenty of opportunities for the Co., so a trailing PE of 11 at the CMP of about 913 seems rather attractive.
I also gather that one of the risks for infrastructure companies is that State govts are at times tardy in making payments, but that should not be the case here as most of the projects are with NHAI or with the private sector. Also, the revenues in the sector are back ended with 60-65% of the business coming in during the second half of the year.
Still in the conviction building stage here and any further inputs would be appreciated.
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