Hindustan Construction Company (HCC) has shown a remarkable rise in its stock value, soaring by 1113% over the past four years. This surge highlights the company’s strong performance and market confidence. Early investors have seen significant returns, making it a standout in the stock market.
Over the last three years, HCC’s stock has surged by 391%, moving from ₹10.87 in June 2021 to current levels. In the past year alone, the stock climbed 153%, and it’s up 83.5% in 2024. Despite some fluctuations, including a 2% drop in May and a 21.2% decline in March, the stock rebounded with gains of 20% in April and a 41% increase in June. January 2024 saw the stock’s value jump by 53.4%.
Recently, HCC’s stock hit its 52-week high at ₹53.40 today, June 25, 2024. This is a substantial recovery from its 52-week low of ₹17.84 on July 26, 2023, showing an increase of over 199%.
About the Company
Founded in 1926 and headquartered in Mumbai, HCC offers extensive engineering and construction services across India and internationally. The company handles a variety of projects, including roads, highways, bridges, railways, metro systems, ports, marine structures, dams, tunnels, powerhouses, and various underground works. HCC also works on water supply, irrigation, sewage treatment, and hydrocarbon plants. Additionally, it provides services in toll management, real estate development, insurance, IT consulting, and road maintenance.
Recent Earnings
In the March quarter of FY24, HCC reported a 22.12% rise in consolidated net profit, reaching ₹246.2 crore compared to ₹201.6 crore the previous year. The company’s total income for the quarter was ₹1,813.05 crore, down from ₹2,437.23 crore a year earlier, with total expenses decreasing to ₹2,073.33 crore from ₹2,398.69 crore. For the fiscal year 2023-24, HCC achieved a consolidated net profit of ₹529.42 crore, a significant turnaround from a net loss of ₹52.51 crore in FY23.
Brokerage Opinions
Elara Securities recently started coverage on HCC with a ‘buy’ rating and set a target price of ₹63 per share, suggesting an 18% upside. They noted HCC’s improved financial health, with standalone debt reduced from ₹6,200 crore in FY22 to ₹3,400 crore in FY24. Elara expects HCC’s standalone revenue and EBITDA to grow at a 20% CAGR from FY24 to FY27, driven by lower interest costs leading to a 50% earnings CAGR. HCC is well-positioned to benefit from the ₹1.5 lakh crore nuclear opportunity, with anticipated order inflows of around ₹9,000 crore.
ICICI Direct also observed strong momentum in HCC, highlighting that its stock price is trading above short-, medium-, and long-term moving averages. HCC has shown robust EPS growth and continues to demonstrate strong annual EPS growth trends, indicating positive market sentiment and a bullish outlook.
Risks
However, ICICI Direct identified some weaknesses:
- High Interest Payments: Compared to earnings, interest payments are high.
- Decreased MF Shareholding: Mutual funds reduced their shareholding last quarter.
- Declining Net Cash Flow: The company is struggling to generate net cash.
Investing in Small-Cap Stocks
Investing in small-cap stocks like HCC can offer substantial returns due to their lower price points. However, these stocks often face liquidity challenges, lower trading volumes, and may lack stringent financial oversight, increasing the risk of market manipulation and fraud. These factors contribute to heightened volatility, and investors must conduct thorough research and employ strong risk management strategies to navigate these risks effectively.
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