PNC Infratech Ltd. share price target

PNC remains our preferred pick in the EPC space given its robust order book, comfortable working capital cycle, healthy return ratios and lean balance sheet. Notwithstanding near term hiccups on account of Covid-19, PNC is likely to tide over with resilient fundamentals. While monetisation of BOT/HAM assets could be delayed in near term, we do not see it as a major issue with sufficient internal accruals from current order book enough for equity infusion. Hence, we maintain our BUY rating on the stock with a revised SoTP target price of | 175/share. We value its construction business...

PNC Infratech (PNC) reported decent set of numbers during Q4 FY20withstandalonerevenuegrowing7.6%yoydespiteCOVID19 relatedshutdownimpacting10daysofexecutionduringMar'20.Its operating margin remained strong at 13.5% (down 55 bps yoy)....

We broadly maintain our revenue and EBITDA margin estimates for FY21E/ FY22E. However, we increase our FY22E APAT estimates due to lower tax as company will adopt the new tax rate from FY22E. We expect healthy revenue/ APAT CAGR of 9.1%/ 8.1% over FY20-22E. Moreover, revenue/ APAT growth significantly slows down to 2.3%/ 10.3% in FY21E due to lockdown impact and jumps back to revenue/ APAT growth of 16.4%/ 30.2% in FY22E driven by stabilization of labour and supply chain issues coupled with execution from 4 HAM projects where AD is expected in Q3FY21E. The current core construction...

Construction remains one of the most severely impacted sectors due to the Covid-19 lockdown. The tolling at highways was stopped given the lockdown while execution of EPC/HAM projects has come to a blanket halt amid unavailability of labour and raw materials. We expect labour unavailability to persist even once the lockdown is lifted as it could take time for remobilisation of labourers. Also, even if the work at project sites resume within one or two weeks post the lockdown, the onset of the monsoon season from Q2FY20E could slow down execution, going ahead. Amid these...

Construction remains one of the most severely impacted sectors due to the Covid-19 lockdown. The tolling at highways was stopped given the lockdown while execution of EPC/HAM projects has come to a blanket halt amid unavailability of labour and raw materials. We expect labour unavailability to persist even once the lockdown is lifted as it could take time for remobilisation of labourers. Also, even if the work at project sites resume within one or two weeks post the lockdown, the onset of the monsoon season from Q2FY20E could slow down execution, going ahead. Amid these...

Strong execution of large projects led to strong revenue growth of 68% YoY in Q3FY20 (in-line with our estimate). EBITDA margins remain flat at 14.06% while 9MFY20 margins improved by 120bps YoY at 16.3%. Order book stood healthy at Rs8,659cr which is 1.8x TTM revenue and the company is expecting additional orders of ~Rs5,000cr in Q4FY20 which provides visibility. PAT grew by 69% YoY to Rs77cr due to strong margin and higher other income....

Over FY18-20E PNC has delivered 68% Rev CAGR on back of robust order inflows. Order inflow for FYTD20E has been weak at Rs 10bn. PNC needs to win Rs 50-60bn of new orders during 4QFY20 to prevent a PE de-rating. NHAI bid pipeline is strong with limited competitive intensity in HAM segment. We expect PNC to win Rs 52bn new order during 4QFY20E. Balance sheet is strong with net cash of Rs 900mn as of 3QFY20. NWC has reduced to 56days and best amongst peers. Ghaziabad Aligarh monetization proceeds of Rs 3bn will provide further comfort on HAM equity funding. We maintain BUY. Key risks (1) Slowdown in NHAI ordering; (2) Delay in HAM projects monetization. Whilst PNC reported 3QFY20 Rev/EBIDTA/APAT miss of 9.8/9.4/10.7% respectively we have retained our FY20E Rev estimate. We maintain BUY on PNC with a SOTP based TP of Rs 339/sh (18x FY21E EPS). We have increased our APAT estimate by 6/0.3% for FY20/21E to factor in higher other income and lower tax rate.

PNC Infratech's (PNCL) Q3FY20 revenue grew 68% YoY.

PNC's order book (OB) was at | 8,696 crore as of Q3FY20, implying order book-to-bill ratio of 1.9x on TTM revenues, giving us comfort on revenue visibility ahead. This does not include Challakere-Hariyur project (BPC: | 1,157.0 crore) and EPC project in Uttar Pradesh under NHDP Phase-VII as appointed dates on these projects are awaited. The company has submitted bids for projects worth | 15,000 crore and has further identified 40 projects to bid for in Q4FY20. With this, it has maintained order inflows guidance of | 5,000-6,000 crore in FY20E. On the execution front, execution in six out of...

EBITDA margins improved by 844bps YoY at 21.8% while adj. for one-off EBITDA margin remain stable at 13.8%. In Q2FY20 PNC has bagged a fresh order of Rs1,062cr and Order book stood healthy at Rs9,877cr which is 2.3x TTM revenue, provides improved visibility. PAT grew by 489% YoY to Rs207cr due to strong margin, lower tax rate of 16% and higher other income....