Pritish Nandy Communications Ltd. share price target

With robust 1QFY20 performance PNC has demonstrated strong on ground execution capabilities. This came with improving NWC days. Large order pipeline in UP (specifically the Bundelkhand, Gorakhpur Link and Ganga Expressways) augurs well for new order wins. PNC has guided for ~Rs 60-70bn inflows in FY20E (HAM~50%). Asset monetization of Aligarh Ghaziabad project is on track with PNC receiving NOC from 12/13 lenders (last bank to give NOC by Sep-19) for stake sale to Cube Highways. The company expects the inflow to happen by Dec-19. The plans to increase fund based limits to Rs 10bn and non-fund based limits to Rs 50bn would also enable the company to bid for projects with large ticket sizes. We maintain BUY. Key risks (1) Slowdown in NHAI ordering; (2) Delay in UP state projects awards. We maintain BUY on PNC with a SOTP based TP of Rs 339/sh (18x FY21E EPS). We have not made any changes to our estimates.

We maintain BUY with increased SOTP of Rs 285/sh vs. Rs 270/sh earlier. PNC reported inline execution of Rs 5.6bn (+108% YoY, -21%QoQ), despite (1) 2QFY19 being a monsoon quarter and (2) ~58% of order book yet to move into execution). Interest cost shot up to Rs 153mn (+99% YoY, +44% QoQ) as gross debt increased to Rs 3.4bn (vs Rs 2.5bn QoQ and Rs 1.7bn in FY18), largely driven by Capex /WC.