G R Infraprojects Ltd (GRIL) has built a highly capital efficient execution engine, well oiled with strong funding lines, powered by low interest costs and empowered by robust management depth and bandwidth, brokerage firm HDFC Securities said as it believes the company’s long-term growth trajectory would be largely funded by internal accruals and asset monetisation.
“Diversification will also not be a constraint as the company’s strong balance sheet, low levels of fund/non-fund based utilisation, and strong cash flow generation bode well for growth,” the brokerage said in a note adding that the Indian contractor’s ecosystem is developing with a high number of contractors in early growth cycles failing to graduate to the next level due to lack of capital. “A wide gap remains between the largest listed peer and the second largest company; we believe GRIL has the right ingredients which would put it on the path of narrowing the gap.”
HDFC Securities believes that GR Infra is well poised to deliver high quality/sustainable growth, which may lead to a multiyear rerating. It has initiated coverage with a Buy rating on the stock with a target price of ₹2,372 per share, up to 50% potential upside from current market price of ₹1,590 apiece.
For GRIL, the brokerage believes that neither scale nor diversification is an issue. In the near to medium term, the focus will remain on central government funded roads and railways projects (including high-speed rail, metro, regional rapid transport system). In the long term, GRIL is open to bidding for new segments, provided the projects are funded by multilateral agencies, central government or state governments (financial closure should be in place) and are not margin or balance sheet dilutive.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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