Broker’s call: HCC (Buy) – The Hindu BusinessLine

Target: ₹63

CMP: ₹39.79

Once the toast of India’s infrastructure space, Hindustan Construction Company (HCC) saw its fortunes wither away post-FY11 due to policy paralysis and delayed decision-making by the government, which also dealt a serious blow to the construction industry. After a decade and a slew of measures, including debt restructuring, dispute settlement, and non-core asset monetisation, the company is ready to flex its muscles as India bulks up on large infra opportunities.

HCC’s 10-decade-old experience of executing in-house complex and marquee projects, 26 per cent of hydropower capacity, and 60 per cent share of India’s civil nuclear power capacity position it to capture on ₹1.5-lakh crore nuclear opportunity.

Recent credit rating upgrades and the removal of restrictions on bank guarantee limits allow HCC to bid for new contracts. It is in L1 position on ₹4,500 crore orders, bids under evaluation of ₹10,400 crore, and pipelines of ₹46,400 crore across power, hydro, roads, nuclear, and transportation. We expect ₹9,000 crore inflows in FY25E vs. guidance of ₹10,000 crore, increasing by 15 per cent pa for the next two years.

Given past experience and the large opportunity landscape, we remain hopeful of a turnaround in financials in FY25 and further strengthening in FY26.

The senior management leadership team has been strengthened to drive the next leg of growth, and promoter stakes have been sustained at around 18.6 per cent post-rights issue.

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