PNC Infratech share price hit the 20% lower circuit in trade today after the Ministry of Road Transport & Highways disqualified the company from participating in any bids by the ministry for a period of one year starting Oct. 18, 2024, in linkage with ongoing CBI investigation pertaining to a bribery case.
It is to be noted that on Jun. 8, the CBI had conducted searches at PNC's corporate offices, other locations and the residences of Yogesh Kumar Jain, MD, PNC and T. R. Rao, Whole Time Director.
According to JM Financial, while PNC will pivot it focus on state entities like MSRDC, UPEIDA, CIDCO, etc. in highways vertical and explore non-highway verticals like Metro, water (JJM), railways, etc. with renewed vigour, it believes that the pace of incremental order inflows will slow down.
The brokerage has downgraded the stock to a 'Hold' rating as compared to 'Buy' rating with a price target of Rs 410, implying a 10.7% downside on the previous close.
PNC's order backlog stood at Rs 19,100 crore as of June-24. Of this, around 38% is from Ministry of Road Transport and Highways of India/National Highways Authority of India. The note said that it believes that the execution of existing projects of MoRTH/NHAI will continue.
However, it mentioned, "Following the disqualification by MoRTH, we have lowered our order inflow estimates from Rs 12,000 crore/Rs 13,500 crore/Rs 15,000 crore to Rs 8,500 crore/Rs 8,000 crore/Rs 13,000 crore in FY25/26/27E. Accordingly, we have cut our revenue estimates by 6%/18% and earnings estimates by 8%/19% in FY26/27E, respectively", the note added.
The note added that in past bribery investigations involving companies like GR Infra/Ashoka Buildcon/Dilip Buildcon, the firms were disqualified from bidding for NHAI projects for a period 30/45/120 days. However, PNC has faced a severe ban of 365 days.
This year, PNC has secured order inflows of Rs 7,000 crore and the management has guided for order inflows of Rs 13,000-15,000 crore for FY25E.
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