YES Securities is bullish on PNC Infratech has recommended buy rating on the stock with a target price of Rs 201 in its research report dated June 28, 2020.
YES Securities' research report on PNC Infratech
PNC Infratech (PNC) reported decent set of numbers during Q4 FY20 with standalone revenue growing 7.6% yoy despite COVID-19 related shutdown impacting 10 days of execution during Mar’ 20. Its operating margin remained strong at 13.5% (down 55 bps yoy). However, higher interest and tax outgo led to a 45.6% yoy decline in net profit. At the end of Mar’20, PNC’s order book stood heathy at Rs.86.3 bn (excluding 5 HAM projects estimated to have EPC value of ~Rs.60 bn). Order inflow target for FY21 stood at ~Rs.70bn. Cancellation of Ghaziabad Aligarh Project deal with Cube Highways (net inflows expected: ~Rs.3bn) to translate effectively into higher fund requirements. Monetization of HAM projects is likely to be delayed due to sharp cut in bank rate while borrowing costs haven’t fallen at same proportion.
With COVID impact on topline and margins, we cut our estimates for FY21 and FY22. However, we believe, the company is well placed to speed up execution in H2 FY21. Continued focus on asset monetization and comfortable balance sheet position provide comfort. We maintain our BUY rating on the stock for revised target of Rs.201 (Based on SOTP valuation).
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