PNC Infratech's Q3FY20 results (Outperformer) - Strong execution; strong guidance
Q3FY20 result highlights
- PNC reported revenue of Rs12.2bn, +68% yoy (est of Rs10.2bn) in Q3FY20 aided by execution on new HAM and EPC road projects. 9mFY20 revenue was Rs36bn, a growth of 81% yoy.
- Adjusted EBITDA came in at Rs1.7bn, +68% yoy. EBITDA Margin for Q3FY20 was 14.1% (est of 14.0%). Note that EBITDA margin for FY19 and FY18 was 14.8% and 14.5% respectively
- Interest cost during the quarter rose by 114% yoy to Rs401m (higher than our est of Rs247m) led by utilisation of Rs8bn of mobilisation advances. As a result, PNC’s Q3FY20 earnings was Rs771bn (vs estimate of Rs794m)
- PNC’s order backlog is Rs87bn 1.9x (book to bill ratio). The current order book doesn’t include EPC value of ~Rs11.5bn for 4 laning of Challakere to Hariyur section of NH 150 and Rs10.6bn order of Lucknow ring road as both are awaiting appointed dates
- Gross toll collection (excl annuity projects) on a like-to-like basis declined by 3% to Rs1.9bn led by low traffic growth.
- PNC had maintained its guidance for revenue growth to 50-60% for FY20E and has guided for revenue growth of 20% for FY21E. It has also guided for order inflow of Rs50-60bn on robust NHAI order pipeline. PNC has submitted bids for Rs155bn worth of NHAI projects (results is awaited).
Key positives: Strong execution; robust NHAI pipeline.
Key negatives: Only Rs11bn worth of LOA in 9mFY20.
Impact on financials: Maintain our FY20E earnings; Increase FY21E earnings by 7% on increased revenue visibility and introduce FY22E estimates.
Valuations & view
PNC not only offers a very robust growth visibility owing to its large order backlog but also continues to invest in increasing its execution capabilities. We estimate 34%/28% 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 13x/12x FY20E/FY21E standalone earnings adjusted for Rs36/share of BOT assets value. Maintain Outperformer with TP of Rs269/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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