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Order book provides visibility...

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 revenue growth of 17% YoY in Q4FY22 led by a pick up in execution.

* However, EBITDA margin declined by 241bps to 11.7% due to higher RM costs and the adjustment for impairment of Rs90.33cr related to Ghaziabad project.

* The order book remains healthy at Rs14,663cr which is 2.3x FY22 revenue and the company is targeting an order inflow of Rs8,000 to Rs10,000cr in FY23.

* PNC is declared as an L1 for 7 HAM projects worth Rs8,446cr and expects the appointed date by Q3FY23.

* The company has guided for revenue growth of 15% with EBITDA margin of 13% -13.5% in FY23.

* We expect a rerate in valuation in receipt of appointed date for HAM projects and monetization of operational projects. We reiterate Buy rating on the stock with a TP of Rs315 based on a P/ E of 12x on FY24E EPS and BOT/HAM projects at 0.5xP/B.

Healthy order book...

In FY22, the company has received and order inflow of Rs11,200cr, surpassed the expectation of Rs10,000cr guided by the company. Further, PNC is declared as an L1 bidder for 7 HAM projects from NHAI of Rs 8,446cr, where the company expects the appointed date by Q3FY23. Excluding the L1 orders, the total order books now stands at Rs14,663cr which is 2.3x FY22 revenue and provides strong revenue visibility in the coming years. The road projects constitute 65% of the total order book and remaining is irrigation and other projects. The total equity requirements for the projects stands at Rs2400cr, out of this the company has already infused Rs920cr till FY22. Pending Rs1,480cr is expected to be done in the next three years. Based on a strong order pipeline from NHAI the company maintained an order inflow target of Rs8,000cr to Rs10,000crfor FY23.

Execution to pick up...

PNC reported a revenue growth of 17% YoY to Rs1917cr in Q4FY22 led by pick up in execution. In FY22, the revenue grew by 28% YoY and the has guided for revenue growth of 15% in FY23 supported by strong order book. The management expect Rs 5500cr to Rs6000cr of revenue from road, Rs200cr to Rs300cr from new HAM projects , Rs1500cr from Jal Jeevan Mission (JJM) and Rs200cr from irrigation projects in FY23. We expect execution to pick up as majority of the land has been acquired for all the new HAM projects and the company is expecting the appointed date by Q3FY23.

Margins impacted…

EBITDA margin declined by 241bps YoY at 11.7% due to higher raw material costs and the adjustment for impairment of Rs90.33cr related to Ghaziabad project. PAT grew by 7% YoY to Rs138cr, impacted by higher interest expenses (15% Yoy) and fall in other income (50% YoY) . The company expects margins to be in the range of 13% to 13.5% in FY23, aided by strong execution.

Valuations

We expect a rerate in valuation in receipt of appointed date for HAM projects and monetization of operational projects. The robust order book and strong execution capability will keep the outlook intact. We reiterate our Buy rating on the stock and value EPC business at a P/E of 12x on FY24E EPS & BOT/HAM projects at 0.5x P/B with a TP of Rs 315.

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