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Guidance Intact, outcome on NHAI notice awaited

PNC Infratech delivered a healthy Q1FY27 performance, with adjusted revenue (excluding the one-time settlement) broadly in line with our and consensus estimates, while adjusted PAT (+33% YoY) exceeded expectations on the back of stable execution. Management reiterated its FY27/FY28 revenue guidance of INR 60bn/75bn (+30/+25% YoY) and FY27 order inflow guidance of INR 120–150bn, supported by a robust bidding pipeline of 24 bids worth ~INR 320bn and an identified opportunity pipeline of 78 projects worth ~INR 1.7tn. The company also expects working capital to improve from the current 110 days, aided by the release of pending payments from JJM and Andhra Pradesh irrigation projects, with AP irrigation receivables expected to decline to ~INR 0.6bn following imminent collections. On the Kanpur-Lucknow Expressway incident, management maintained that the matter remains under NHAI's review, describing the affected stretches as isolated rainfall-induced maintenance issues while refraining from commenting on any potential regulatory outcome. We continue to factor in FY27E/FY28E EPS growth of 15%/30% and reiterate our BUY rating with a SOTP-based target price of INR 271, underpinned by a robust net cash balance sheet and valuations at ~11x FY28E EPS and ~0.8x FY28E BV.

Strong operational performance:

PNC Infratech reported standalone revenue of INR 15.1 bn (+34% YoY) in Q1FY27; however, this included a one-time settlement of INR 2.2 bn under the Vivad Se Vishwas scheme. Adjusted revenue stood at INR 13.0 bn (+14% YoY), broadly in line with our and consensus estimates. Adjusted EBITDA came in at INR 1.6 bn (+12% YoY) with a stable margin of 12.1% (vs. 12.4% YoY), while adjusted PAT increased 33% YoY to INR 1.1 bn, exceeding our and consensus estimates by 20% and 25%, respectively, aided by healthy execution and improved profitability.

Guidance intact with large opportunities:

Management reiterated its guidance despite the recent KanpurLucknow Expressway incident, reflecting confidence in execution and order inflows. The company continues to target FY27 revenue of INR 60 bn(+30% YoY), FY28 revenue of INR 75 bn(+25% YoY), and FY27 order inflows of INR 120–150 bn, supported by the award of five new projects during the year. PNC highlighted a robust bidding pipeline, having already submitted bids for 24 projects worth ~INR 320 bn (16 EPC and 8 HAM), while another 78 projects worth ~INR 1.7 tn are expected to be bid over the next 2–3 months. Management also remains optimistic on medium-term growth opportunities, driven by the government's infrastructure push across highways, railways, metro, airports, mining, power transmission and water sectors. The recently announced 54 highway projects worth ~INR 1.8 tn, along with the expected INR 6 tn investment in power transmission over the next five years, are expected to provide ample opportunities for order book replenishment and support PNC's diversification strategy beyond roads

Clarification on Kanpur-Lucknow incident:

Management stated that the show-cause notice issued by NHAI is currently under review, and the company has submitted its response. Consequently, it refrained from commenting on any potential regulatory action, including possible debarment or restrictions on future bidding, stating that such discussions would be speculative until NHAI completes the due process. Management clarified that the affected portions were isolated stretches impacted by torrential rainfall and described the repairs as routine maintenance activities under the concession agreement rather than an unusual structural failure. It further noted that repair timelines are contractually defined, ranging from 24 hours to 180 days depending on the severity of observations, and that the company is complying with these requirements. Management also emphasized that the suspension of toll collection was NHAI's decision and declined to quantify the financial impact or comment on media reports, which it believed had exaggerated the extent of the issue.

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