PNC Infratech Ltd. share price target

PNC has been recently declared lowest bidder (L1) in two big-ticket hybrid annuity (HAM) projects from NHAI worth | 2720 crore. It consists of four laning of two sections of Jhansi-Khajuraho highway in Madhya Pradesh and Uttar Pradesh. With this, the company has won four HAM projects in FY17 worth | 5031 crore, thereby boosting its orderbook to ~| 9200 crore, providing strong revenue visibility over the next few years. It has also achieved financial closure for Dausa-Kauthun project worth | 881 crore. The company foresees strong opportunities in the road sector and...

PNC Infratech reported, Q3FY17, standalone revenue of INR 464 crore (-11.1%, YoY) that was below our estimates of INR 485 crore (-4.4%) due to delay in commencement of execution on...

ICICI Securities Ltd | Retail Equity Research PNC Infratech's (PNC) topline de-grew 11.1% YoY to | 463.7 crore (our expectation: | 506.2 crore) as five major projects (~74% of orderbook) witnessed a delay in appointment date for execution EBITDA margin expanded 63 bps YoY to 13% (our estimate: 12.9%) Net profit zoomed 2.4x YoY to | 76.7 crore on account of negative tax rate of 50.7% in Q3FY17 vs. 34.4% in Q3FY16). Hence, it was not comparable to our PAT estimate. However, PBT at | 50.9 crore was...

PNC Infratech (PNCL) delivered strong 3QFY17 numbers with revenue/APAT coming in 14.9/31.8% above our estimate. Net debt-free standalone BS, gradual pickup in slow moving orders and limited BOT capex are key triggers for further re-rating.

Q2FY17 Result Update- Execution looks better in second half

PNC Infratech (PNCL) delivered weak 2QFY17 APAT (~34.5% below estimates), on account of delay in NHAI awarding compensation to land owners as per new land bill. This impacted execution on Rs 30bn worth projects (~55% order backlog). PNCL expects the issue to be sorted out by 4QFY17E with all the projects moving into execution.

ICICI Securities Ltd | Retail Equity Research PNC Infratech's (PNC) topline de-grew 23.3% YoY to | 359.9 crore (our expectation: | 489.3 crore) due to muted execution amid heavy monsoon & delay in receiving appointed dates for few EPC projects EBITDA margin reduced 10 bps YoY to 12.9% (our estimate: 13.0%) Net profit grew by 15.4% YoY to | 35.2 crore. However, it was below our expectation of | 48.0 crore mainly on account of dismal topline performance & higher than expected interest expenses...

For 1QFY2017, PNC Infratech (PNC) reported top-line growth of 18.6% while the bottom-line grew by substantial 145.6% yoy. The top-line growth was driven by strong execution across Agra-Firozabad and Varanasi-Gorakhpur road projects. Despite strong execution, decline in raw material and other expenses led to 81bp yoy decline in EBITDA margin to 13.0%. A 11.6% yoy EBITDA growth coupled with tax benefits and MAT credit led PAT grow by 145.6% yoy. PAT margins stood at 12.4%, rose significantly on a yoy basis.

Outlook and valuation: Considering the strong uptick in roads and highways EPC award activity especially in north India, where PNC has more comfort, and given its past track record and recent wins, we expect the standalone entity to report 20.1% top-line CAGR over FY2015-2017E. With normal tax rate applicable from FY2018, the bottom-line growth would be of -3.3% CAGR during the same period. Accordingly, RoEs would decline from 23.3% in FY2016 to 13.9% in FY2018E. We are also now comforted that the consolidated Balance Sheet would peak from FY2017E onwards. Using the SoTP valuation methodology we arrive at a FY2018E based price target of `143. Given the 19% upside in stock form the current levels, we recommend BUY rating on the stock.

Top takeaways from Q1FY17 : Strong 19% yoy growth in topline – was inline with our and consensus estimates.  EBITDA margins at 13% (flat qoq) – along expectations.  EBITDA at Rs 671mn (+12% yoy) – was bang inline with our estimate (Rs 670mn). Other income was boosted by Rs 140mn exceptional income on loan to subsidiary. PAT was boosted by higher other income and MAT credit – adjusted PAT was inline with estimates. Orderbook was Rs 51bn (2.4x book-to-sales); 3.1x including L1 of Rs 13.7bn. Standalone debt at Rs 150mn (down from Rs 3.5bn in FY15) on repayment using IPO cash proceeds. Cash reserves at Rs 1.3bn, making it net cash company (from leverage of 0.5x in March 2015). Debtor days reduced to 54 from 68 in March 2016. It expects these to be at 80-90 going forward. Net WC days decreased to 87 from 92 in March 2016 – expected to be 115-120 days going forward.

Valuation: Phillip Capital have made minor revision to FY17-18 estimates. They continue to value PNC using SoTP – EPC business at 15x FY18 P/E (inline with peers) and BOT at 1x P/BV. Also note that DCF value of PNC’s BOT portfolio is 20% higher than the book-value – hence providing further upside potential, over and above our price target. They maintain BUY rating with price target of Rs 140 (unchanged).

 

 

PNC Infratech's (PNC) topline grew 18.6% YoY to | 515.0 crore (our expectation: | 500.8 crore) led by better execution EBITDA margin declined 81 bps YoY to 13% (vs. our estimate: 13.2%) PAT grew 2.5x YoY to | 64.0 crore (vs. our estimate: | 39.4 crore) on account of higher other income (| 17.4 crore in Q1FY17 vs. | 1.9 crore Q1FY16), lower interest expenses (| 2.2 crore in Q1FY17 vs. | 10.3 crore in Q1FY16) and lower effective tax rate (8.9% in Q1FY17 vs. 34.5% in Q1FY16 due to MAT credit entitlement of | 8.2 crore)...