PNC Infratech Ltd Stock Research Report

Seasonality & Lower Executable Order Book Impacts Performance; Retain HOLD

Est. Vs. Actual for Q2FY25: Revenue – MISS; EBITDA Margin – MISS; PAT– MISS

Revision in Estimates post Q2FY25

FY25E/FY26E: Revenue:-17%/-13%; EBITDA: -13%/-10%; PAT: -13%/-13%

Recommendation Rationale

• Robust & Diversified Order Book:

PNCIL has an order book valued at Rs 19,910 Cr (as of 30th Sep 2024), which is over 2.5 times FY24 revenue. In Oct’24, the company received an LOA for one EPC project worth Rs 2,039 Cr from CIDCO and two EPC projects worth Rs 4,630 Cr from MSRDC in Maharashtra. The order book is welldiversified between roads and water projects, indicating revenue visibility for the next 2-2.5 years.

• Order Inflow of Rs 6,000-8,000 Cr Expected in H2FY25:

The management anticipates an additional order inflow of Rs 6,000-8,000 Cr in H2FY25, supported by a robust bid pipeline of Rs 25,000 Cr. The company has already bid for projects worth Rs 11,000 Cr from authorities other than MoRTH and NHAI and will be bidding for projects worth Rs 14,000 Cr in the coming quarter. In line with its diversification strategy, the company is expanding its focus to include bids in the railway and water segments across both state and central projects, aiming to reduce reliance on the road sector and create a more resilient revenue base.

• Revision in Revenue estimates:

Given the project delays amounting to Rs 6,836 Cr owing to the non-receipt of the appointed date and a slowdown in new project awards due to the Ministry of Road Transport and Highways (MoRTH) ban, FY25 revenue is projected to be adversely impacted. Management anticipates a rebound in project execution in H2FY25. However, it has revised guidance to reflect a 15-20% revenue decline for FY25, with a recovery leading to approximately 30% growth in FY26. In line with this, we are revising our revenue estimates downward for both FY25 and FY26.

Sector Outlook: Positive

Company Outlook & Guidance: For FY25, the company expects revenue to de-grow by 15-20% due to delays in land acquisition and continued monsoon impact in the execution. EBITDA margins are expected to be between 12-12.5%.

Current Valuation: 7x FY26 EPS (Earlier Valuation: 12x FY26 EPS) and HAM assets 1.2x book value

Current TP: Rs 300/share (Earlier TP: Rs 465/share)

Recommendation:We maintain our HOLD recommendation on the stock.

Alternative BUY Ideas from our Sector Coverage: H.G Infra (TP: Rs 1800/share), G R
Infraprojects Ltd (TP: 1760/share), J Kumar Infra (TP: 950/share)

PNC Infratech Ltd Stock Research Report

Financial Performance:

The company reported revenue of Rs 1,149 Cr, down 32% YoY, due to slow project execution caused by extended monsoons, delays in awarding AD, and slow awarding activity. It recorded an EBITDA of Rs
134 Cr, down 41% YoY, and an APAT of Rs 81 Cr, down 42% YoY. The company posted an EBITDA margin of 11.6% in Q2FY25 (vs. an estimate of 12.5%), compared to 13.4% in Q2FY24.

Key Financials (Consolidated)

Outlook

The road sector is expected to receive a significant boost as the government scales up infrastructure investments, as outlined in the Budget 2024-25. In response, the company is actively exploring opportunities in railway projects to diversify its revenue streams and mitigate sector-specific risks. The first half of FY25 was challenged by factors such as elections, extreme heat conditions, and delays in receiving appointed dates (AD) for pending projects. Additionally, the ongoing MoRTH ban has added uncertainty to the company’s growth prospects, impacting near-term project wins. Consequently, we have revised our revenue estimates for FY25 and FY26. We look forward to improved performance as the company advances through these challenges.

Valuation & Recommendation

The stock is currently trading at an implied PE of 7x FY26E EPS. We maintain our HOLD recommendation on the stock with a TP of Rs 300/share, implying a 0% upside from the CMP