Buy PNC Infratech Ltd For Target Rs. 330 by Axis Securities
NHAI Ban to be Lifted & Robust Order Book To Drive Growth; Upgrade To BUY
Est. Vs. Actual for Q3FY25: Revenue – MISS; EBITDA Margin – MISS; PAT– MISS
Revision in Estimates post Q3FY25
FY25E/FY26E: Revenue: -6%/2%; EBITDA: -5%/-1%; PAT: -5%/0%
Recommendation Rationale
* Robust & Diversified Order Book: As of 31st Dec’24, PNCIL’s order book stood at Rs 18,962 Cr, representing over 2.4x FY24 revenue, providing revenue visibility for the next 2-2.5 years. Aligned with its diversification strategy, the company is expanding its focus to include bids in the railway and water segments across both state and central projects. This approach aims to reduce reliance on the road sector and create a more resilient revenue base.
* Order Inflow of Rs 13,000-15,000 Cr Expected for FY25: As of 31st Dec’24, the company received an order inflow of Rs 6,670 Cr, with management anticipating an additional Rs 6,000-9,000 Cr in Q4FY25. This is supported by a robust bid pipeline of Rs 25,000 Cr in non-MoRTH projects and around Rs 1,25,000 Cr from NHAI and MoRTH projects. Furthermore, management has guided for an order inflow of Rs 15,000 Cr in FY26.
* Lifting of NHAI ban, big positive for the company: In October 2024, NHAI had imposed a one-year ban on the company from bidding for projects. However, the ban was later reduced to four months, set to end on February 18, 2025. This will allow the company to participate in new project bids from NHAI and MoRTH, constituting a significant portion of its order book. Consequently, this is expected to drive an increase in order inflow for Q4FY25 and FY26.
Sector Outlook: Positive
Company Outlook & Guidance: For FY25, the company expects revenue to de-grow by 20- 25% due to delays in land acquisition and receiving AD. However, for FY26, revenue growth is expected to be 25-30%, and EBITDA margins are expected to be between 12-12.5%
Current Valuation: 8x FY26 EPS (Earlier Valuation: 7x FY26 EPS) and HAM assets 1.2x book value
Current TP: Rs 330/share (Earlier TP: Rs 300/share)
Recommendation: We change our HOLD rating to BUY recommendation on the stock
Alternative BUY Ideas from our Sector Coverage: H.G Infra (TP: Rs 1720/share), G R
Infraprojects Ltd (TP: 1430/share), J Kumar Infra (TP: 940/share)
Financial Performance
The company reported revenue of Rs 1,205 Cr, down 33% YoY, due to slow project execution caused by extended monsoons, delays in awarding AD, and slow awarding activity. It recorded an EBITDA of Rs 146 Cr, down 39% YoY, and an APAT of Rs 83 Cr, down 45% YoY. The company posted an EBITDA margin of 12.1% in Q3FY25 (vs. an estimate of 12.1%), compared to 13.3% in Q3FY24.
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SEBI Registration number is INZ00016163
