Buy PNC Infratech; target of Rs 234: HDFC Securities

HDFC Securities' research report on PNC Infratech

PNC Infratech (PNC) reported revenue at Rs 9bn (26% beat), decline of 32%/22% YoY/QoQ. Although, EBITDA fell 33%/23% YoY/QoQ, EBITDA margin remained intact (-36/-27 bps YoY/QoQ), leading to APAT of Rs 601mn (-40%/-21% YoY/QoQ), ~3x our estimate. Labour availability has improved to 90%, and operations have resumed on all sites. Including the five HAM orders and two EPC projects won recently, executable order book stands at Rs 155bn (~3x FY20 revenue). NWC increased sharply to 84 days from 57 days on Mar-20 on lower revenue base. Nevertheless, PNC maintained net cash at the standalone level, with cash balance of Rs 6.7bn.

Outlook

We maintain BUY on PNC, with an unchanged target price of Rs 234/sh, given strong order book and net cash balance sheet. Key risks: (1) slowdown in NHAI ordering and (2) delay in the monetisation of HAM projects. Successful diversification, away from the roads sector, could lead to expansion of multiple.

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