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PNC Infratech Ltd (CMP – 216.95)

PNC Infratech is amongst the leading infrastructure construction, development, and management companies in India with vast experience and demonstrated expertise in the major infrastructure projects, including expressway, highways, bridges, flyovers, airport runways, and industrial area development, amongst others. The Company has an established track record of successful execution of projects across diverse sectors and geographies.

PMC more than 2 decades of experience in the industry and an integrated business model i.e in-house design, engineering, development, construction, operation and management, coupled with large equipment bank, the company has emerged has one of leading highway development, construction and management companies in the country. PMC’s strong execution, timely completion capabilities, long term relations with the stakeholders and wide geographical presence have been the strong pillars of their growth story. With problems of financial closure and fund raising across industry, the company’s strong balance sheet position, strong credit profile and brand image have helped PMC to stay ahead of the curve and overcome these challenges.

With robust order inflows of Rs50bn YTDFY21, PNC’s order backlog is estimated at Rs155bn as on Dec-20 (3.5x TTM revenues). While currently 50% of the backlog is under execution, the share of executable orders should improve to 93% by Mar-21 with likely receipt of appointed dates (AD) for 4 HAM and 2 EPC projects worth Rs66bn The company expects revenue CAGR of 21% over FY21-23E.  

Over the past 20 years, the company has worked with several State Governments and Central Government authorities. In this year, the company has been able to successfully execute several infrastructure projects in number of states, which has helped the company to build strong cliental relations and also helped them to mitigate risk to their business model and efficiently manage their working capital cycle. PMC has been able to build successful, strong and long-term relations with marque clients which includes Central, State and Local Government authorities like NHAI, MoRTH, Airports Authority of India, Military Engineering Services, Delhi State Industrial and Infrastructure Development Corporation Limited, Haryana State Roads and Bridges Development Corporation Limited, Madhya Pradesh Road Development Corporation Limited, Uttar Pradesh State Highways Authority, Uttar Pradesh Expressways Industrial Development Authority, State PWDs, Dedicated Freight Corridor Corporation of India Limited and others. With strong execution credentials, the company has been able to qualify to bid for any large projects awarded and can bid for a single project upto a ticket size of Rs. 4,000 crores individually meeting financial and technical qualifications.

Both ordering and tendering activities have witnessed substantial revival in Q3FY21 after slowing down in Q1FY21 due to Covid outbreak. In Dec-20, tendering jumped 52% yoy to Rs876bn in Dec-20 led by Highways, Irrigation and Water segments. Order awards in Dec-20 at Rs566bn were 3x on yoy basis, albeit aided by award of some high value tenders in Hydrocarbons segment. Bid pipeline from NHAI is Rs558bn currently while tenders worth Rs271bn have been floated in the water/irrigation sector in Q3FY21 (Rs783bn YTD). Apart from the NHAI bid pipeline, UPEIDA is also likely to complete awarding of the Ganga e-way (Meerut – Prayagraj) with EPC potential of Rs222bn. In the water segment the company expects to see a robust pipeline for drinking water distribution projects in Rajasthan and in irrigation the company hopes to see strong pipeline of orders from Andhra Pradesh.

The stock at the CMP of Rs.216.95 trades at about 16.99x its trailing twelve months EPS. We believe that the company has a strong order book and execution capabilities apart from marquee clientele which provides visibility to the company. The company has the potential to deliver multibagger returns in the medium term. We recommend a Strong Buy on the stock considering the strong business outlook & reasonable valuations.

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