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PNC Infratech Ltd Research Report - 21st Jan 2016

Infrastructure | Published on Nov 09th 2015


PNC Infratech (PNC) reported a top-line and bottom-line growth of 45.1% and 43.4% yoy, respectively, for 2QFY2016. Top-line growth was driven by strong execution across Agra-Firozabad and other road projects. Higher dependency on sub-contracting led PNC to report 50bp yoy decline in its EBITDA margin to 11.7%, for the quarter. A 38.7% yoy EBITDA growth coupled with 55.3% decline in interest expenses led the PAT to grow by 43.4% yoy. PAT margin, at 6.6% for the quarter, was marginally down on a yoy basis. PNC’s unexecuted order book as of 2QFY2016 stands at Rs3,578cr (order book to LTM sales ratio stands at 2.1x). One more BOT is expected to commence operation in FY2016 in addition to 3 already started in YTDFY2016. Management has indicated that it does not intend to add any new BOT projects in FY2016 unless a lucrative project in north India comes up within the ticket size of Rs500cr. 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 21.1% and 28.5% top-line and bottom-line CAGR, respectively, over FY2015-2017E. This, coupled with the likelihood of 1 BOT project commencing operation in FY2016E, leads us to estimate that the consolidated Balance Sheet should peak from FY2017E onwards, which is comforting. Using SoTP based valuation methodology we arrive at a FY2017E based price target of Rs558. Given the 7% upside in the stock form the current levels, we maintain our Accumulate rating on the stock.

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CMP 522
Target Price 558
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others3.0
Grand Total100.0

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