> *Nomura: Iniates Buy | Afcons Infrastructure | (14 February 2025)* *Investment Thesis* Rating: Initiated coverage with a Buy rating. Target Price (TP): INR 561, implying a +27.8% upside from the closing price of INR 439. *Justification for Premium Valuation:* Strong execution track record for complex projects. Stable financials with consistent margins and a healthy balance sheet. Conservative approach to debt and financial risk. *Growth & Financial Projections* Revenue CAGR (FY25-FY27): 22%, driven by strong order inflows. PAT CAGR (FY25-FY27): 39%, supported by sustained margins, reduced interest costs, and normalized tax rates. EBITDA Margin Outlook: Expected to remain stable at 10.5-11% due to selective bidding on high-margin projects. Order Inflows: INR 253 billion in 9M FY25, with an additional INR 107 billion in L1 status. Projected Order Book: INR 550 billion over FY25-FY27. *Competitive Strengths* Execution Capabilities: Proven track record of delivering complex projects ahead of schedule. Selective Bidding Strategy: Focuses on specialized, high-margin projects with fewer competitors. Operational Excellence: Uses proprietary technology, a strategic equipment base, and efficient risk management. ESG Initiatives: Recognized for environmental and social efforts, including water recycling and workforce development. *Risks & Challenges* Execution Delays: Project slowdowns could impact revenue recognition. Commodity Price Volatility: Fluctuations in raw material costs could affect margins. Competitive Intensity: Higher bidding competition may impact profitability. Working Capital Management: While strong, monitoring of receivables and arbitration cases remains key. *Valuation Comparison* Trades at 22.5x FY26F EPS and 17.2x FY27F EPS. Premium to KEC International (~20%) due to superior execution and financial stability. Discount to L&T (~20%) due to smaller scale, weaker access to funding, and lower diversification. *Conclusion* Afcons Infrastructure is well-positioned to capitalize on India's USD 350 billion+ infrastructure investment pipeline. Its strong execution, disciplined bidding, and improving financials justify a Buy rating with a 27.8% upside potential. However, investors should monitor project execution, order book growth, and macroeconomic risks.