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Brokerages retain 'buy' on PNC Infratech after a robust Q4, expect up to 36% upside

The construction and engineering company reported a 66.35 percent jump in net profit at Rs 150.36 crore from Rs 90.39 crore in the year-ago quarter.

June 29, 2021 / 10:29 AM IST
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PNC Infratech share price added more than a percent in the morning trade on June 29. The stock was trading at Rs 249.70, up Rs 3.80, or 1.55 percent. It touched an intraday high of Rs 251.75 and an intraday low of Rs 246.65.

The construction and engineering company reported a 66.35 percent jump in net profit at Rs 150.36 crore in the quarter ended March 2021 from Rs 90.39 crore in the year-ago quarter.

Its sales were up 38.43 percent to Rs 1864.27 crore against Rs 1346.70 crore during the same quarter of the previous year.

For the full year, the company's net profit declined 9.63 percent to Rs 496.90 crore against Rs 549.88 crore in the previous year. Its sales registered a growth of 3.3 percent to Rs 5787.57 crore in the year ended March 2021 from Rs 5602.57 crore during the previous year.

Research and broking firm HDFC Securities has recommended a "buy" on the stock with a target of Rs 342 per share. The brokerage firm is of the view that the company delivered a largely in line 4QFY21. 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, it said.

"We have tweaked our FY22/23 estimates to account for the impact of second wave and roll forward target price to Rs 342 per share against Rs 338 per share earlier. Diversification, away from the roads sector, could lead to further rerating," it added.

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ICICI Direct, in its research report, also has a “buy” on the stock with a target of Rs 300 a share.

"PNC Infratec remains our preferred pick in the EPC, space given its robust order book, healthy return ratios and lean balance sheet. Irrespective of its asset monetisation plan fructification (it is looking to monetise its BOT/HAM assets and expects some development by year end), sufficient internal accruals from current order book and current cash is enough for equity infusion," it said.

"We maintain our buy rating with an unchanged SoTP target price of Rs 300 per share. We value its construction business at Rs 253 per share (at 6.5x FY23E EV/EBITDA implying ~12x FY23 EPS)," the brokerage firm said.

Yes Securities, too, retained the “buy” call on the stock with the target of Rs 338 a share.

"The execution has picked up sharply during the quarter and PNC ended the year with flattish topline growth. The margins have been stable at 13.5‐14 percent levels despite the increase in input costs. The order flows during FY21 has been robust despite pandemic and current order book of Rs 16,600 crore (>3x FY21 revenues) provides strong growth visibility," it said.

The order pipeline is very strong which would aid order inflows during FY22. Asset Monetization is progressing well, which would further improve the balance sheet and order intake capacity, it said.

Yes Securities marginally increased its estimates for FY22 and FY23 to factor in the strong performance and maintained “buy” rating on the stock for a target price of Rs.338 (on SOTP basis). “We have valued the EPC business at 12x FY23E EPS and Investments in BOT at book value," the brokerage said.

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Sandip Das
first published: Jun 29, 2021 10:29 am