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Axis Securities Report
PNC Infratech Ltd. reported revenue of Rs 1,693 crore (up 8% YoY) and Ebitda of Rs 228 crore (up 10% YoY). It recorded an adjusted profit after tax of Rs 140 crore (up 7% YoY).
The company posted an Ebitda margin of 13.4% in Q2 FY24 (versus our estimate of 13.5%), compared to 13.3% in Q2 FY23. APAT margin was 8.3% versus 8.4% in Q2 FY23.
PNC Infratech Ltd.'s share of revenue from engineering, procurement, and construction/water projects/tolls/annuity was 68%/21%/11%.
Outlook
The road sector has seen heightened investment as the government increases investment in infrastructure. The management has also indicated that the intensity of competition for high-value projects in hybrid-annuity-model has decreased, while it remained high in EPC projects. It is also looking to bid for water projects in states apart from Uttar Pradesh.
The order inflow to date remains nill and hence meeting order inflow guidance remains key monitorable.
Given the strong and diversified order book, efficient execution, asset monetization plan, and lean balance sheet, we expect PNC Infra to grow revenue/Ebitda/APAT at 12%/14%/19% compound annual growth rate in FY23-25E.
Valuation and recommendation
The stock is currently trading at 12.5 times and 11 times FY24E/FY25E earning per share.
We retain our 'Buy' rating on the stock with a target price of Rs 415/share, implying an upside of 28% from the current market price.
Key risks to our estimates and target price
Lower order inflow and slower execution may hamper revenue growth
Higher input prices may impact margins.
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