Shares of Hindustan Construction Company rose 12% on Tuesday morning after Elara Securities initiated coverage with a "buy" call and a target price of ₹65, implying an upside of 65% from its closing price on Friday.
Analyst Views: Elara initiated the coverage expecting a revenue and EBITDA compound annual growth rate (CAGR) of 20% each during FY24-27 and an earnings CAGR at 50% due to lower interest cost.
The brokerage argues that recent credit ratings upgrade and removal of restrictions for bank guarantee limit will allow the company to bid for new contracts. The company is currently the lowest bidder on orders worth ₹4,500 crore, with a pipeline of orders worth ₹46,400 crore across power, hydro, roads, nuclear and transportation.
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The company had a peak consolidated debt of ₹12,200 crore in FY15, which reduced by 71% to ₹3500 crore in FY24. Elara sees the company become positive from FY26 and move into a sustainable growth phase from thereon. The company partnering with private equity investors would help the company bag projects without straining its balance sheet.
In its March quarter results, the company's net profit went up 22.14% to ₹246.23 crore. Its revenue from operations stood at ₹1,773.13 crore compared with ₹2,426.30 crore in the previous year.
Price Action: Shares of HCC rallied 12.31% to ₹44.70 on Tuesday morning session.
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