Maintain BUY on PNC Infratech - In-line quarter - Q4FY21 - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

PNC Infratech (PNC) delivered a largely in-line 4QFY21 with revenue/EBITDA/APAT at INR 16.4/2.3/2.3 bn. Execution has not been impacted much in 1QFY22 as labour availability remained intact despite the second wave of the pandemic. Margins are also expected to remain healthy as large part of the order book (OB) has a cost escalation clause. With this backdrop, management has guided for 20% topline growth, 13.5-14% EBITDA margin, and INR 80-90bn order inflow in FY22. We maintain BUY on PNC, given a strong OB and net cash balance sheet. A slowdown in NHAI ordering and delay in the monetisation of HAM projects are key risks to our numbers. We have tweaked our FY22/23 estimates to account for the impact of second wave and roll forward target price to INR 342/sh (INR 338/sh earlier). Diversification, away from the roads sector, could lead to further rerating.

Largely in-line quarter; 20% topline growth achievable: PNC reported revenue at INR 16.4bn (+42%/+24% YoY/QoQ), marginal beat on our estimate. EBITDA came in at INR 2.3bn (+49% YoY, +30% QoQ, 7% beat). EBITDA margin expanded by +63/+63 bps YoY/QoQ to 14.1% (vs estimate of 13.5%). Interest cost came in at INR 148mn, (-53% YoY, -3% QoQ). Consequently, APAT came in at INR 1.3bn (+70% YoY, +25% QoQ, 6% beat). We believe guidance of 20% topline growth is achievable, given all projects barring two water projects have received appointed date (AD).

Order inflow guidance of INR 80-90bn; focus remains on roads: Order inflow of INR 77bn during FY21 took the OB to INR 166bn (~3.3x FY21 revenue). While PNC has diversified into irrigation and rural water supply projects, roads will remain the focus area for the company. PNC expects INR 80-90bn orders during FY22 on the back of potential robust ordering by NHAI. While AD for one out of the three water projects has been received, the other two projects would receive it in 2-3 months as DPR is finalised.

Net cash balance sheet; monetisation key monitorable: NWC increased marginally to 82 days from 78 at FY20 end. PNC would require to infuse INR 3.5/3.2/3bn equity in under construction and recently-won HAM projects in FY22/23/24E. Capex budgeted for FY22 is INR 1.25bn. While PNC could fund the equity requirement from internal accruals, we believe monetisation of HAM projects would be key to churn the capital and unlock value.

Shares of PNC Infratech Ltd was last trading in BSE at Rs.246 as compared to the previous close of Rs. 249.15. The total number of shares traded during the day was 48663 in over 1588 trades.

The stock hit an intraday high of Rs. 254.25 and intraday low of 244.25. The net turnover during the day was Rs. 12102600.

Source : Equity Bulls

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