Buy PNC Infratech, target price Rs 175: ICICI Direct

ICICI Direct has given a buy rating to PNC Infratech with a 12-18 months target price of Rs 175. The share price moved up by 0.74 per cent from its previous close of Rs 142.05. The stock’s last traded price is Rs 143.10.

PNC Infratech reported a resilient Q4FY20 operating performance. Revenues grew 7.6 per cent year on year to Rs 1157.9 crore in Q4FY20. EBITDA margins at 13.5 per cent, down 55 bps year on year, were better than the brokerage estimate of 13 per cent. PAT came in at Rs 76.1 crore (down 45.6 per cent year on year) vs. expectation of Rs 58.5 crore, with beat led by superior EBITDA. The decline in PAT on a year on year basis, was largely owing to Rs 66 crore reversal of tax paid in earlier years, in the base quarter (Q4FY19). On a PBT basis, the decline was a modest 6.5 per cent year on year.

Investment Rationale

PNC remains the preferred pick of the brokerage in the EPC space given its robust order book, comfortable working capital cycle, healthy return ratios and lean balance sheet. Notwithstanding near term hiccups on account of Covid-19, PNC is likely to tide over with resilient fundamentals.

While monetisation of BOT/HAM assets could be delayed in the near term, the brokerage does not see it as a major issue with sufficient internal accruals from current order book enough for equity infusion. Hence, it maintains a buy rating on the stock with a revised SoTP target price of Rs 175/share. The brokerage values its construction business at Rs 137/share (at 4.5 times FY22E EV/EBITDA implying 8.5 times FY22 EPS).

Change in Estimates


Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 1346.70 crore, down -3.14 per cent from last quarter sales of Rs 1390.41 crore and up 6.00 per cent from last year's same quarter sales of Rs 1270.42 crore. The company reported net profit after tax of Rs 88.82 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 56.07 per cent stake in the company as of March 31, 2020, while FIIs held 6.37 per cent, DIIs 23.81 per cent and public & others 13.75 per cent.