PNC Infratech Poised To Benefit From Uttar Pradesh Road Building Boom, Says Nomura 

PNC Infratech Ltd. rallied after Nomura Global Markets Research initiated coverage on the stock with ‘Buy' rating.

The engineering and construction firm will benefit from rising infrastructure spending in North India, the brokerage house wrote in its research report. Nomura has set the target price at Rs 210 per share, which indicates a potential upside of 41 percent from Tuesday's closing price.

The consensus 12-month price target on the PNC Infratech stock is Rs 163, according to 19 analysts tracked by Bloomberg. 84 percent of those analysts have a ‘Buy' rating on the stock.

Both the central and the state governments are expected to increase spending on roads in Uttar Pradesh in the lead-up to the national elections in May 2019. PNC Infratech is likely to be the prime beneficiary of these opportunities, according to Nomura.

The pickup in activity in some of the previously stalled highway projects is expected to reflect in the financials of the company from the second half of the current financial year, the brokerage added.

Its earnings per share is projected to grow at a compounded annual growth rate of 25 percent over the financial years 2016-17 to 2018-19, according to Nomura. Moreover, its debt-to-equity of 8 percent in the last financial year, which is one of the lowest in the sector, is expected to help PNC Infratech get cheap debt.

The company's shares gained as much as 5.95 percent to Rs 155.7, its highest level in a month.

The stock has outperformed the benchmark index on a year-to-date basis, rising 44.5 percent compared to the S&P BSE Sensex Index's 19.3 percent increase.

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