HDFC Securities bullish on this infra title, sees up to 50% increase

GR Infraprojects Ltd (GRIL) has built a highly capital efficient execution engine, well oiled with strong funding lines, fueled by low interest costs and with robust depth of management and bandwidth , said brokerage firm HDFC Securities, confident of the company’s long-term growth. This trajectory would be largely financed by internal regularizations and the monetization of assets.

“Diversification will also not be a constraint as the company’s strong balance sheet, low levels of fund / non-fund utilization and strong cash flow generation bode well for growth,” said the brokerage in a note adding that the Indian entrepreneur ecosystem is thriving with a high number of subcontractors at the start of growth cycles, failing to scale up due to lack of capital. “A significant gap remains between the largest listed peer and the second largest company; we think GRIL has the right ingredients that would set the stage for narrowing the gap. “

HDFC Securities believes that GR Infra is well positioned to deliver high quality / sustainable growth which could lead to a revaluation over several years. He initiated a hedge with a buy note on the stock with a target price of ??2,372 per share, up to a 50% potential increase over the current market price of ??1,590 each.

For GRIL, the brokerage believes that neither scale nor diversification is an issue. In the short to medium term, the focus will remain on centrally funded road and rail projects (including high speed train, metro, regional rapid transport system). In the long term, GRIL is open to tendering for new segments, provided that the projects are funded by multilateral agencies, central government or state governments (financial close must be in place) and are not margin or balance sheet dilutives.

The opinions and recommendations expressed above are those of individual analysts or brokerage firms, not Mint.

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