PNC Infratech's Q4FY19 results (Outperformer) - Poised for growth; Strong order book
Q4FY19 result highlights
- PNC’s revenue grew by 54% yoy to Rs10.8bn (est of Rs8.0bn) in Q4FY19 and 71% yoy to Rs31bn in FY19. The revenue has grown on back of strong execution on new road projects.
- EBITDA Margin for the quarter was 14.1% (est of 13.5%) in Q4FY19 and 12.7% in FY19. (vs 14.1% in FY18)
- As a result, PNC’s Q4FY19 earnings of Rs741m were sharply ahead of estimate of Rs504m led by better execution/better margins. FY19 profit grew to Rsxxbn, +23% up yoy.
- PNC’s order backlog is robust at Rs122bn (4.0x book to bill ratio) without including EPC value of ~Rs9.5bn for 4 laning of Challakere to Hariyur section of NH 150 which is awaiting appointed date.
- Given its robust order backlog, PNC has guided for a revenue growth of ~45% in FY20 with EBITDA margins in the range of 13.75-14.0% while capital expenditure guidance for FY20 is Rs1.25-1.5bn.
- During the quarter, PNC has entered into an agreement to sell its 35% stake in Ghaziabad Aligarh project for nearly Rs3bn. The total inflow of Rs3bn will be used to fund equity requirement for its HAM projects (total requirement of Rs8.3bn; Rs2.3bn already infused)
- Gross toll collection (excl annuity projects) on a like-to-like basis grew 13%yoy to Rs2bn led by strong traffic growth, especially in Kanpur-Kabrai and Kanpur-Ayodhya projects. FY19 was Rs7.5bn, 12% growth yoy
Key positives: Strong order backlog position and early completion of Aligarh – Moradabad Expressway (total bonus expected of Rs644m).
Key negatives: Decline in gross debt QoQ despite rise in execution
Impact on financials: Introduce our FY21E EPS of Rs13.2.
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 18x/15x FY20E/FY21E standalone earnings adjusted for Rs36/share of BOT assets value. Maintain Outperformer with revised TP of Rs221/share (roll over to FY21E).
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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