Buy PNC Infratech Ltd For Target Rs.396- Yes Securities
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Strong growth momentum to continue
Our view
PNC Infratech (PNCL) reported strong set of numbers with revenues coming in above our estimates and EBITDAM coming at 14.7% (including one off income pertaining to early completion bonus of Rs370mn for Purvanchal Expressway package VI) excluding this EBITDA margin came in at 13.5%. During 1Q, the company has signed concessionaire agreement for 6 newly awarded HAM projects and expects to sign balance 1 HAM project by 2Q and expects to complete financial closure of all the projects within 180days stipulated time. The company is in discussion with strategic investors for monetization of its HAM portfolio and expects the transaction to complete by FY23end. Given strong 1Q execution and healthy order inflows management has maintained its guidance of 15% revenue growth with EBITDA margins of 13.5% in FY23E.
PNCL continues to be one of our preferred picks in road infra space given its 1) healthy order book (~Rs204bn as on 1Q), 2) stellar execution pace and most projects getting completed within stipulated time, 3) stable EBITDA margins (1314%) and 4) low debt equity. We expect PNCL to report Revenue/PAT CAGR of 31%/39% respectively over FY22 FY24E. We maintain BUY rating on the stock with a SOTP based TP of Rs 396, which includes Rs378 for the standalone EPC business based on 15x FY24E EPS of Rs25.2 and the remaining for its BOT and HAM portfolios based on P/B.
Result Highlights
* For 1QFY23, PNCL’s revenues came in at Rs17.6bn, up 40.5% YoY (above our estimates of Rs16.2bn) with sharp pickup in execution levels.
* EBITDA grew by 46.9% YoY to Rs2.6bn (Ysec estimate of Rs2.0bn), with EBITDAM expanding 64bps YoY to 14.7% (above our estimates of Rs12.5%) mainly due to lower other expense.
* On the bottom line front, adj PAT in 1QFY23 came in at Rs1,665mn, up 78.5% YoY (above our estimates of Rs1,239mn) mainly due to higher operating margins
* At the CMP, the stock trades at a PE of 11.4x FY23E and 10.0x FY24E EPS.
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