Stock Of The Day: HCC Surges To Record On First-Ever Bullish Analyst Coverage—Key Levels

Jun 11, 2024

Shares of Hindustan Construction Co jumped the most in nearly three months to hit an all-time high after the company get’s its first ever analysts coverage.

Homegrown brokerage firm Elara Capital initiated coverage on the stock with a ‘buy’ rating, brokerage set a target price of Rs 63 apiece, implying an upside of 58% from Monday’s close.

The research firm expects a strengthening of the company’s finances with an average earnings growth of 50% through fiscal 2027. “Given past experience and a large opportunity landscape, we remain hopeful of a turnaround in financials from fiscal 2025 and further strengthening from financial year 2026,” it said in a research note.

The brokerage expects a compounded annual growth rate, or CAGR, of 20% each in standalone revenue and Ebitda from fiscal 2024 through 2027, with an average earnings of 50% due to lower interest costs.

Elara also anticipates a reduction in its debt burden, citing a 71% reduction in its peak consolidated debt, including accrued interest, from Rs 12,200 crore in fiscal 2015 to Rs 3,500 crore in fiscal 2024.

The peak standalone debt of Rs 6,200 crore in March 2022 fell by 45% to Rs 3,400 crore by March 2024 and stabilised. “Standalone finance costs declined to Rs 540 crore in the financial year 2023-24, compared to Rs 950 crore in fiscal 2022,” it said.

Elara, therefore, expects the company’s net worth to turn positive in fiscal 2026 from a peak negative of Rs 1,300 crore in fiscal 2021 and is optimistic that the company will move into a sustainable high growth phase thereafter.

The brokerage believes HCC’s 10-decade-old experience of executing in-house complex and marquee projects—26% of India’s hydropower capacity and 60% of India’s civil nuclear power capacity—positions it to capture the Rs 1.5 lakh crore nuclear opportunity.

Valuation Trigger for Elara Capital

Key Risks Outlined By Elara Capital

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