PNC Infratech's Q1FY20 results (Outperformer) - Strong beat in execution
Q1FY20 result highlights
- PNC’s revenue grew by 86% yoy to Rs13.2bn (est of Rs8.0bn) in Q1FY20. The revenue has grown on back of strong execution on new HAM road projects.
- EBITDA Margin for Q1FY20 was 13.6% (est of 14.0%). Note that EBITDA margin for FY19 and FY18 was 12.7% and 14.1% respectively
- As a result, PNC’s Q1FY20 earnings of Rs1bn, a growth of 18% yoy ( sharply ahead of estimate of Rs659m) led by better execution. Note that Q1FY19 earnings have been adjusted for bonus income of Rs250m.
- PNC’s order backlog is robust at Rs110bn (3.0x book to bill ratio). The current order book doesn’t include EPC value of ~Rs9.5bn for 4 laning of Challakere to Hariyur section of NH 150 (pending appointed date)
- During the quarter, PNC received arbitration award of Rs1.9bn in Narela Industrial Estate Project. Out of which, Rs596m has been booked in consolidated profit as other income. Besides, it also received Rs1.5bn recently from arbitration awards from NHAI (will be booked in Q2FY20).
- Gross toll collection (excl annuity projects) on a like-to-like basis grew 8%yoy to Rs2bn led by strong traffic growth.
- PNC had guided for a) revenue growth of ~45% b) EBITDA margins in the range of 13.75-14.0% c) capital expenditure of Rs1.5bn in FY20
Key positives: Strong execution; Eligible for bonus on early completion for Aligarh Moradabad Highway Project (~Rs140m)
Impact on financials: Increase our FY20E/FY21E earnings by 13%/7% respectively to Rs3.1bn/Rs3.6bn for beat in Q1FY20 estimates
Valuations & view
PNC not only offers a very robust growth visibility owing its large order backlog but it also continues to invest in increasing its execution capabilities. We estimate 28%/19% revenue/EPS CAGR for PNC over FY19-21E on the back of strong order book. PNC’s efforts at divesting its operating BOT/HAM assets will provide cash flow for meeting its equity commitment in HAM projects and lower the debt levels currently factored by us. PNC trades at 14x/12x FY20E/FY21E standalone earnings adjusted for Rs36/share of BOT assets value. Maintain Outperformer with revised TP of Rs243/share (as we assign 1xequity invested of Rs2.8bn in HAM projects).
PNC Infratech Limited is an infrastructure construction, development and management company. The Company is primarily engaged in the areas of infrastructure projects, including highways, bridges, flyovers, power transmission lines, airport runways and other infrastructure activities. The Company's segments include EPC Contract and BOT (Toll and Annuity). It offers end-to-end infrastructure implementation solutions that include engineering, procurement and construction (EPC) services. It implements projects on various Public-Private-Partnership (PPP) formats, including Design-BuildFinance-Operate-Transfer (DBFOT), OperateMaintain-Transfer (OMT) and Hybrid models. It is involved in the construction and development of Highways, Bridges and flyovers, and Industrial area development. It focuses on road building projects in Punjab, Haryana, Tamil Nadu, Madhya Pradesh, Maharashtra, Karnataka, Rajasthan, Uttar Pradesh, Uttarakhand, West Bengal and North Eastern India.
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