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Buy PNC Infratech Ltd For Target Rs.338 - Yes Securities
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Result Highlights
* PNC Infratech (PNC) posted revenue growth of 42.0% yoy and 24.3% qoq driven by a sharp pickup in execution. The Company recovered the revenue lost during H1 due to COVID and ended FY21 with revenue of Rs.49.2 bn almost flat yoy.
* Operating margin has also seen an improvement and stood at 14.1% in Q4 FY21, up by 63 bps yoy & qoq. There has not been any major impact of inflation in raw material cost as all its EPC & HAM projects has escalation clause. Going forward the management has guided to maintain EBITDA margin in the range of 13.5%‐ 14.0%.
* PNC Infratech is currently sitting on a robust order book of Rs. 166 bn with book to bill ratio of ~3.4x. The Company has not won any projects during Q4 FY21. However, the tender pipeline is strong.
* The company on 1st April 2021 has entered into a sale purchase agreement to sell its 35% stake in Ghaziabad Aligarh expressway to Cube Highways. It has also received the NOC from bankers for the sale and expects the deal to be completed in next month. Further the company is in discussion with 2 investors for divesting more BOT & HAM projects.
Our view:
The execution has picked up sharply during the quarter and PNC ended the year with flattish topline growth. The margins have been stable at 13.5%‐14.0% levels despite the increase in input costs. The order flows during FY21 has been robust despite pandemic and current order book of Rs.166 bn (>3x FY21 revenues) provides strong growth visibility.
The order pipeline is very strong which would aid order inflows during FY22. Asset Monetization is progressing well which would further improve the balance sheet and order intake capacity. We have marginally increased our estimates for FY22 & FY23 to factor in the strong performance and maintain our BUY rating on the stock for target price of Rs.338 (on SOTP basis). We have valued the EPC business at 12x FY23E EPS and Investments in BOT at book value.
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