They see an extra 35 per cent upside within the inventory, as the corporate’s order e book provides strong income visibility for the medium time period. Low leverage, good tempo of execution and powerful money movement observe report place this inventory among the many high midcap EPC (engineering, procurement and building) bets, analysts stated.
Order e book
Analysts famous PNC’s order e book stood at Rs 9,852 crore on the finish of the December quarter. However that excluded two HAM tasks: Challakere-Hiriyur with an EPC worth of Rs 935 crore and Meerut-Nazibabad undertaking with a bid price of Rs 1,412 crore.
Additionally they exclude two EPC tasks of Delhi-Vadodara alignment price Rs 1,548 crore, and irrigation and water tasks price Rs 3,766 crore.
Together with these tasks, the corporate’s order e book stands at practically Rs 18,000 crore, and carry the order book-to-trailing 12-month income to 4.1 instances, which is prone to turn into 100 per cent executable by April.
“This supplies income visibility over the subsequent three years,” ICICIdirect stated.
Below the hybrid annuity mannequin (HAM), the federal government bears 40 per cent of a undertaking price whereas the remaining funding comes from the contractor. It’s a mixture of pure EPC and BOT (build-operate-transfer) fashions. Within the EPC mannequin, a participant simply executes the order e book and provides it again to the federal government, whereas within the BOT mannequin, the participant has to construct, function and preserve a highway undertaking for a particular interval, earlier than giving it again to the federal government.
For the primary 9 months of FY21 up to now, PNC Infra bagged Rs 7,700 price of orders and bade for Rs 15,000 crore price of highway tasks. The corporate is anticipating to bag extra orders price Rs 2,000 crore in March quarter and Rs 10,000 crore in FY22.
“A excessive share of the orderbook (44 per cent) being L1, with two HAMs and two EPC highway tasks awaiting appointed date (AD), there stays solely minor considerations and they’re anticipated to be addressed by the top of this monetary yr,” stated Phillip Capital.
L1 is the bottom industrial bid designated in a monetary bid analysis.
Nomura India stated the corporate administration had guided for 10 per cent income decline in June quarter, however now it’s guiding for flattish development (excluding early completion bonus) over FY20.
“This highlights that execution pickup has been materially larger than administration estimates. This follows a development of PNC Infra exceeding its gross sales steerage in FY19 and FY20 as nicely,” it stated.
Revenue for PNC Infra greater than doubled to Rs 176 crore in December quarter from Rs 67 crore the year-ago interval. Income rose 14 per cent YoY to Rs 1,582 crore from Rs 1,390 crore. Ebitda margin expanded to 25.7 per cent within the third quarter from 24.Three per cent within the second and 21.Four per cent within the year-ago quarter.
The corporate administration stated NHAI (Nationwide Freeway Authority of India) has already awarded 2,424 km within the first 9 months and is anticipated to award additional 4,800-5,200 km quickly. Thus, NHAI is prone to surpass its goal of 4,500 km award in FY21.
For FY22, that focus on is prone to hit 8,500 km, which supplies incremental alternative for the corporate to bag highway tasks, analysts stated.
Analysts famous that the corporate must infuse Rs 930 crore price of fairness within the HAM tasks and is assured of doing so by way of inner accruals. Out of this, it has already invested Rs 540 crore. It might want to speculate Rs 350 crore in FY22 and Rs 170 crore in FY23.
The administration is wanting so as to add extra HAM tasks to the portfolio within the mild of its sturdy money movement.
Edelweiss stated the corporate’s toll collections rebounded sharply within the December quarter, as financial exercise picked up. Whole collections for the 5 key toll tasks grew 16–42 per cent YoY. The administration is in talks with strategic traders to monetise a few of these belongings. “It will additional enhance steadiness sheet energy,” Edelweiss stated.
Nomura stated PNC can fund fairness necessities for HAM tasks largely from inner accruals over FY21-23 — with out deleveraging by way of asset gross sales, not like its friends, due a low-debt steadiness sheet.
“Within the occasion of sale of an asset just like the Ghaziabad-Aligarh Expressway and doubtlessly some toll/HAM belongings as focused by the administration, the flexibility to take additional orders to assist development would enhance considerably,” it stated.
PNC sees good alternative within the water phase and is trying to bid in UP and neighboring states. It stated it will proceed to deal with the highway sector, diversifying into water on the identical time.
Phillip Capital stated the corporate is well monitoring the EPC evolution curve and diversifying its orderbook into non-roads segments, with water and irrigation now forming over 25 per cent of its total order e book.
“It has additionally maintained its web money standing, with a steadiness sheet sturdy sufficient to fund HAM fairness necessities by itself,” the brokerage stated.
Nomura values the inventory at Rs 364 on a FY23 EPS estimate of Rs 26.7. The inventory climbed to Rs 291 final week, however traded at Rs 272 on Monday. Nomura goal suggests 36 per cent potential upside. Phillip Capital sees the inventory at Rs 330.
“We estimate a sturdy 22 per cent income development CAGR and 25 per cent EPS development CAGR over FY21-23 led by a robust order backlog. Our FY22/FY23 estimates think about barely decrease Ebitda margins at 13 per cent vis-à-vis 13.5-14 per cent, traditionally as a consequence of larger enter costs and execution of water orders with larger share of bought-out parts — practically two-third of the order worth,” Centrum Broking stated.
Centrum valued PNC’s EPC enterprise at 14 instances FY23 EPS and noticed the fairness invested in highway belongings at Rs 45 per share to reach at a goal of Rs 340. IDBI Capital sees the inventory at Rs 331, Anand Rathi at Rs 312, Edelweiss at Rs 305 and ICICIdirect at Rs 300.