Buy PNC Infratech Ltd For Target Rs.390 - ICICI Direct
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HAM monetisation – key trigger ahead
About the stock: PNC Infratech has established itself as a strong executor in roads, water infra and airport runway segments. Additionally, superior execution capabilities via ownership of modern equipment and in-house teams enables PNC to deliver projects on-time. PNC has executed 70 major infrastructure projects till date.
Reported 19.8% revenue CAGR during FY16-21; operating margin was in the range of 13-15%
Proficient execution, robust return ratios (RoCE: ~20%)
Q3FY22 Results:: Mixed bag - one-off impairment impacted reported margins
Standalone revenue was up 15.1% YoY to | 1,522 crore
Reported EBITDA at | 165.5 crore was down 7.3% YoY with margin at 10.9%, down 263 bps YoY. The company has booked | 39 crore towards impairment of Ghaziabad Aligarh Expressway Pvt Ltd. (associate company). Adjusted for this, the company’s margin was at 13.5%
PAT was at | 81 crore, down 21.5% YoY. Considering one-time impairment cost, PAT improved 17% YoY to | 120.4 crore
What should investors do? PNC’s share price has grown at 22% CAGR over the past five years (from ~| 102 in February 2017 to ~| 276 levels in February 2022)
We maintain our BUY rating on the company
Target Price and Valuation:We value PNC at | 390/share.
Key triggers for future price performance:
PNC is likely to be one of the major beneficiaries of thriving roads and water supply segment (Jal Jeevan Mission)
Strong order book position, receipt of appointed date in most of its projects, and execution pick-up to translate into 17% topline CAGR over FY21-24E and stable margins
Planned monetisation of HAM/annuity assets by FY22 end
Alternate Stock Idea:Besides PNC, we like KNR Constructions in the EPC space.
Lean balance sheet, strong execution and healthy order book
Lean balance sheet, strong execution and healthy order book
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