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Healthy performance

PNC Infratech (PNC) posted Q2FY22 revenue/PAT growth of 53%/95% YoY with a lower tax rate aiding PAT. The company has an order book of ~INR132bn (book-to-bill of ~2.3x) and needs to shore this up to enhance revenue visibility; balance sheet remains healthy with nil net debt. Toll collection improved 9% YoY during the quarter.

We believe PNC is well placed to benefit from the government’s thrust on infra. All in all, we are revising up FY22E/FY23E earnings by 17%/12%, and believe order intake and asset monetisation will be the key stock triggers. Retain ‘BUY’ with a revised SoTP-based TP of INR395 (INR359 earlier) while rolling over the valuation to Mar-23E.

Robust performance

Top line jumped 29% QoQ to INR16.2bn; EBITDA margin edged down 30bp QoQ while PAT rose 45% QoQ to ~INR1.4bn. The company ended the quarter with an order book of ~INR132bn (book-to-bill of 2.3x). Management has guided for 20–25% revenue growth in FY22 with an EBITDA margin of 13.5–13.75%.

BOT/HAM portfolio: Toll collection moves up

Toll collection rose 9% YoY in Q2FY22 with all projects, barring Gwalior-Bhind, clocking YoY growth (in collections). Management expects to receive pending approvals for the stake sale of the Ghaziabad-Aligarh project soon and the deal to be closed over the next month. In addition, they are is in discussions with strategic investors to monetise five HAM and one annuity asset with ~INR6.8bn equity base; management expects to receive bids over the next couple of months. Should the asset sale go through, balance sheet strength will improve further.

Internal accruals sufficient for incremental equity in HAM projects

The company is liable to infuse ~INR8bn worth of equity in its HAM projects and is confident of doing so via internal accruals. It has already received PCOD for four HAM projects.

Outlook and valuation: Attractive; retain 'BUY'

Order-wins will be the key stock catalyst in our view. We are revising up FY22E/23E earnings by 17%/12%; maintain ‘BUY/SO’ with a revised SoTP-based target price of INR395 (INR322 from the EPC business, balance from DCF valuation of BOT/HAM projects) as we roll forward the valuation to Mar-23E.

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