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PNC Infratech Ltd Research Report - 08th Jun 2016

Infrastructure | Published on Jun 08th 2016

IT

For 4QFY2016, PNC Infratech (PNC) reported a top-line growth of 27.4% while the bottom-line grew by a substantial 250% yoy. The top-line growth was driven by strong execution across Agra-Firozabad and other road projects. Stronger execution and yoy decline in employee expenses led to a 31bp yoy expansion in the EBITDA margin to 12.5%. A 30.6% yoy EBITDA growth coupled with tax reversals and MAT credit led the PAT to grow by 250% yoy. The PAT margin, at 19.6%, rose significantly on a yoy basis. PNC’s unexecuted order book as of 4QFY2016 stands at Rs5,797cr (order book to LTM sales ratio stands at 2.7x). All the BOT projects are now operational as of FY2016-end. The Management has indicated that it does not intend to add any new BOT projects in FY2017-18 unless a lucrative project in north India comes up within the Rs500cr ticket size. As a result, we are of the view that PNC’s consolidated D/E ratio would peak out in FY2017E. Outlook and valuation: Considering the strong uptick in roads and highways EPC award activity especially in north India, where PNC has more comfort, and given its past track record and recent wins, we expect the standalone entity to report 20.1% top-line CAGR over FY2015-2017E. With normal tax rate applicable from FY2018, the bottom-line growth would be of -5.3% CAGR during the same period. Accordingly, the RoEs would decline from 23.3% in FY2016 to 13.2% in FY2018E. We are also now comforted that the consolidated Balance Sheet would peak from FY2017E onwards. Using the SoTP valuation methodology we arrive at a FY2018E based price target of Rs647. Given the 13% upside in the stock form the current levels, we maintain our Accumulate rating on the stock.

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Accumulate

CMP 570
Target Price 647
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)2,818.08
MCAP NSE (Rs in Cr)2,823.21
P/E (x)11.42
EPS (Rs.)9.62
BV (Rs.)53.10
Div Yield (%)0.46
FV (Rs.)2.00
P/BV (x)2.15
EV/Sales (x)2.54
EV/EBITDA (x)21.54

Shareholding Pattern (%)

Promoter56.0
Institution16.0
Corporate14.0
Foreign12.0
Public & Others2.0
Grand Total100.0

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