Buy PNC Infratech Ltd For Target Rs.442- Yes Securities
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Strong results, Asset monetization on the horizon
Our view
PNC Infratech Ltd (PNCL) reported strong set of numbers beating our estimates by 20.7/24/48.1%. During Mar’23, the company has bagged 4 HAM projects (LOA already received). worth Rs40.8bn and expects to bag additional Rs100?120bn of order inflows led by robust pipeline primarily in road and water segment. On the balance sheet front, company has maintained net cash position, strong enough to fund HAM equity requirement. The company is in discussion with strategic investors for monetization of its HAM/BOT portfolio and expects the signing of definitive agreement by Dec’23. Given healthy order book (Rs157bn) and strong execution capabilities, management has guided for 15% revenue growth with EBITDA margins of 13?13.5% range for FY24E.
PNCL continues to be one of our preferred picks in road infra space given its 1) healthy order book (~Rs157bn as on 4Q), 2) stellar execution pace and most projects getting completed within stipulated time, 3) stable EBITDA margins (13?14%) and 4) low debt?equity. We expect PNCL to report Revenue/PAT CAGR of 13%/9% respectively over FY23?FY25E. We maintain BUY rating on the stock with a SOTP?based revised TP of Rs 442, which includes Rs427 for the standalone EPC business based on 15x FY25E EPS of Rs28.5 and the remaining for its BOT and HAM portfolios based on P/B.
Result Highlights
* For 4QFY23, PNCL’s revenues came in at Rs21.1bn, up 10.3% YoY (above our estimates of Rs17.5bn) owing to healthy execution.
* EBITDA grew by 25.1% YoY to Rs2.8bn (above our estimate of Rs2.3bn), with EBITDAM expanding 157bps YoY to 13.3% (above our estimates of Rs12.9%) mainly due to lower other expense and better execution.
* On the bottom-line front, adj PAT in 4QFY23 came in at Rs1.8bn (above our estimates of Rs1.2mn) mainly due to higher operating margins.
* In 4Q, the company has bagged orders worth Rs42bn.
* At the CMP, the stock trades at a PE of 12.6x FY24E and 11.1x FY25E EPS
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