PNC Infratech's Q4FY18 results (Outperformer) - Strong growth ahead
Q4FY18 result highlights
- PNC’s Q4FY18 earnings of Rs1.1bn were sharply ahead of estimate of Rs488m due to receipt of early completion bonus of Rs582m for Agra-Lucknow Expressway and better execution/better margins. Adjusted for bonus, the PAT grew 109.7%yoy to Rs708m.
- Adjusted revenue grew 100%yoy and 48.3%qoq to Rs7bn (est: Rs6.1bn) led by strong execution in newer projects. Adjusted EBITDA grew 117%yoy to Rs1bn (est: Rs788m) and EBITDA margin grew 110bp yoy to 14.7% (est: 13%) aided by favourable price variation claim of Rs65m.
- Gross standalone debt declined Rs300m qoq to Rs1.7bn and consolidated gross debt stood at Rs20bn as on Mar 2018.
- Gross toll collection on a like-to-like basis grew 12.5%yoy to Rs1.9bn led by strong traffic growth, especially in Kanpur-Kabrai and Kanpur-Ayodhya projects. Ghaziabad-Aligarh toll collections recovered to Rs5.7m/day from Rs5.5m/day in Q3FY18 and Rs4.8m/day in Q2FY18.
- PNC’s order backlog is robust at Rs73.2bn (4.1x TTM revenue) without including EPC value of ~Rs28.2bn for Chakeri-Allahabad and Aligarh-Kanpur Pkg II project which are awaiting financial closure. Recently, the company was declared L1 in Purvanchal Expressway Pkg IV EPC project worth Rs17.4bn. Given its robust order backlog, PNC has guided for a revenue growth of ~40% each in FY19 and FY20, respectively with EBITDA margins in the range of 13.6-13.7%.
- Appointed dates have been received for all its EPC projects and for HAM project of Jhansi Khajuraho Pkg I it is likely to be received by June 2018.
Key positives: Strong order backlog position and higher margins.
Key negatives: Increase in receivables due to GST impact.
Impact on financials: No material change in earnings.
Valuations & view
With an improved share of executable orders, PNC’s execution has started to pick-up and should scale up significantly in FY19 & FY20. Land availability in the newer HAM projects is fairly high (more than 80%) and we expect strong pick-up in execution from H2FY19 in these projects. We expect robust 44%/38.5% revenue/PBT CAGR over FY18-20E on a standalone basis. Stock trades at 14.4x/12.3x FY19E/FY20E standalone earnings adjusted for Rs56/sh of BOT assets value. Maintain Outperformer with a SoTP based target price of Rs232 (unchanged).
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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