Buy PNC Infratech Ltd For Target Rs.253 by Prabhudas Liladhar Capital Ltd
Weak Q4, but order momentum improves
PNC Infratech reported a subdued Q4FY26 performance, with revenue at INR14.6bn, up 3% YoY, falling ~15% below our as well as consensus estimates, primarily due to slower execution and delays in appointed dates (ADs). FY26 order inflow stood at INR49bn (excluding ~INR20bn solar EPC orders), while order momentum has improved sharply in Q1FY27 with ~INR40bn of projects at L1 stage. Management has guided for an additional ~INR110bn of inflows during the rest of FY27E. The executable order book, excluding slow-moving projects, remains healthy at ~INR150bn (~3x TTM revenue), with a diversified mix across roads (~60%+), water, mining and emerging businesses. Management has guided for 30%/25% revenue growth in FY27E/FY28E. However, achieving the FY27 growth target is contingent on timely PPA signing and financial closure for solar projects. We retain BUY with SOTP based TP of INR253, supported by a strong balance sheet (Net cash) and attractive valuations at ~11x FY28E EPS and ~0.8x BV.
Weak execution in Q4FY26:
PNC Infratech reported weak standalone performance with revenue reported at INR 14.6 bn up 3% YoY, was 15% below our and consensus estimates, revenue was impacted due to slower execution and delay in appointed dates, EBITDA came in at INR 1.7 bn flat YoY and 15% below our and consensus estimates, impacted due to higher input cost amid West Asia crisis. EBITDA margin stood at 12% vs 12.4% YoY, this resulted in PAT decline of 17% YoY at INR 1 bn was below our and consensus estimates by 30%
Guidance for better revenue in FY27E:
PNC Infratech has guided for a strong growth recovery over FY27–FY28, with revenue expected to grow 30% YoY to INR 60 Bn in FY27 and further 25% in FY28, driven by execution ramp-up of existing projects. EBITDA margins are guided at 12%, with near-term pressure from commodity inflation, though stabilization is expected in H2. The company targets order inflows of INR 150 Bn in FY27, with 60–70% from roads and the balance from diversified segments like railways, water, and renewable energy. Segment-wise, BESS/solar is expected to contribute INR 6 Bn in FY27 and ramp up further in FY28, while coal mining is guided at INR 4 Bn in FY27 and INR 6 Bn in FY28, indicating increasing diversification beyond roads.
Asset Monetisation Driving Balance Sheet Deleveraging:
PNC Infratech has materially strengthened its balance sheet following the successful monetisation of its HAM asset portfolio, which has led to a sharp reduction in leverage and transition towards a net cash / near net debt-free position. The proceeds have not only deleveraged the balance sheet but also created sufficient headroom to fund upcoming equity commitments (INR 5–6 Bn) through internal accruals, limiting reliance on incremental debt. Management indicated that the remaining asset base will be monetised selectively and opportunistically, ensuring optimal valuation and capital recycling. This disciplined approach positions PNC to sustain a light balance sheet while supporting growth in HAM, BESS, and other diversified segments, thereby improving return ratios and financial flexibility over the medium term.
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