IGI Logo

Ramp-up in execution...

PNC Infratech Ltd (PNC) is an Infrastructure construction, development and management company; expertise in execution of projects including highways, bridges, flyovers, airport runways, industrial areas and transmission lines.

* PNC reported a strong revenue growth of 42% YoY in Q4FY21 (better than estimate) as project execution improved due to normalcy in operation post Covid.

* Order book (incl. L1) remains healthy at Rs16,000cr which is 3.3x FY21 revenue, provides revenue visibility for two to three years.

* EBITDA margin improved by 63bps to 14.1% aided by higher execution and lower employee cost (as a % of revenue).

* PAT grew by 70% YoY, further helped by fall in interest costs and higher other income.

* The management expects order inflow of Rs8,000 to Rs9,000cr in FY22, based on strong order pipeline from NHAI.

* Growth in the order book and pick up in execution will drive earnings. We reiterate our Buy rating on the stock with a TP of Rs310 based on a P/E of 13x on FY23E EPS and BOT/HAM projects at 0.5xP/B.

Execution improved due to normalcy in operation...

PNC’s standalone execution was better than our estimate in Q4FY21. The company registered a revenue growth of 42% YoY to Rs1,644cr as project execution improved due to normalcy in operation post Covid. The management expect execution to be strong in the coming quarters as the company has not faced any execution challenges due to second wave of Covid (April to June 2021 period) as construction work was permitted during lockdown.

PNC expects FY22 revenue to increase by 20% YoY (not expecting further Covid related challenges on execution) as the company got appointed date for all pending HAM & EPC projects and execution is picking up. PNC has already infused equity of Rs599cr for HAM projects and further requires Rs860cr of equity in the next three years.

Robust order book...

FY21 executable order book stood at Rs16,000 (incl. projects in L1) which is 3.3x FY21 revenue and provides strong revenue visibility in the coming years. PNC received Rs7,677cr of orders in FY21 and expects fresh orders of Rs8,000cr to Rs9,000cr in FY22, based on strong order pipeline from NHAI. The company is diversified into irrigation and water supply projects, which comprises 28% of the total order book.

PNC has a portfolio of 11 HAM projects of which 4 projects received PCOD (Provisional Commercial Operation Date) and 7 are under construction. The management indicated that the company has initiated the process to monetize BOT/ HAM projects which will helps the company to meet future capital requirement for growth.

Margins to normalise…

EBITDA margin improved by 63bps YoY at 14.1% due to superior order execution and lower employee cost as a % of revenue. PAT grew by 70% YoY to Rs129cr, further helped by fall in interest cost (-53% YoY) and higher other income (7% YoY). The company expects margins to be in the range of 13.5% to 14% in FY22, aided by strong execution.

Valuations

Strong order book and pick-up in execution, we expect EPS to grow at 26% CAGR over FY21-FY23E. We reiterate our Buy rating on the stock and value EPC business at a P/E of 13x on FY23E EPS & BOT/HAM projects at 0.5x P/B with a TP of Rs 310.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at www.geojit.com
SEBI Registration number is INH200000345

Above views are of the author and not of the website kindly read disclaimer