GR Infraprojects share price is recovering as the stock has already risen 72% since its IPO

Initiating coverage of GR Infraprojects, national brokerage and research firm Axis Securities has set a target price of Rs 1,775 per share, implying a 23% upside from today’s opening price of Rs 1,440 per share.

GR Infraprojects’ share price has had a meteoric run on the stock market since its listing last year. The construction and engineering company has so far risen 72% from the upper end of the IPO price range and is expected to rise further. Initiating coverage of GR Infraprojects, national brokerage and research firm Axis Securities has set a target price of Rs 1,775 per share, implying a 23% upside from today’s opening price of Rs 1,440 per share. The brokerage firm said GR Infraprojects is well placed to capitalize on the opportunities that arise in the construction field.

23% upside potential

The company is an integrated road EPC company with experience in the design and construction of various road/highway projects across 15 Indian states. Axis Securities said the overall outlook for the construction sector is strong due to high government spending. “We expect the industry to grow at a CAGR of 6% over FY20-25,” they added. The brokerage firm believes that GR Infra’s strong backlog, better execution and favorable industry winds will drive the company’s overall growth going forward. “We are initiating a hedge on GR Infraprojects with a BUY recommendation and valuing its EPC business at 15xFY24E EPS and HAM portfolio at 1x book value to arrive at a target price of Rs 1,775/share,” they said.

Besides GR Infraprojects, Axis Securities also has a buy rating on its peers such as KNR Construction, PNC Infratech, HG Infra Engineering and PSP Projects.

Strong order book

GR Infraprojects has a strong and diversified backlog, which indicates sustainable revenue growth visibility for the next 2 years. “A strong order book of Rs 16,692 crore along with the government’s focus on road infrastructure development bodes well for the business,” Axis Securities said.

The company’s backlog grew at an impressive CAGR of 24% in fiscal 2017-21 and management expects strong order flow going forward. GR Infraprojects has already submitted a bid for road projects and metro projects totaling Rs 66,000 crore. In addition, diversification into power transmission is seen as a measure that reduces business risk.

Proven experience

GR Infraprojects has more than 25 years of experience in the road sector. Axis Securities said that since 2006, GR Infraprojects has successfully executed more than 100 road construction projects spanning 15 states and is currently executing 27 projects. “With strong execution credentials and backed by its financial and technical qualifications, GRIL has been able to qualify to bid on large projects and can bid on a single project up to a ticket size of Rs 10,000 crore” , they added.

Good position with healthy finances

GR Infra’s revenue grew at a healthy CAGR of 23% in FY2017-21 to reach Rs 7,244 crore in FY21 from Rs 3,182 crore in FY21. fiscal year 17. Its EBITDA margins have remained stable between 17 and 18% during this period, which puts it well positioned in the construction sector. The company achieved revenue/EBITDA/APAT growth of 33%/32%/26% CAGR in fiscal year 2018-21.

Eleanor C. William