Q4FY23 Review: PNC Infratech: On track execution; healthy growth outlook

With on track execution seen in FY23, PNC Infra remains well on track to deliver ~15% EPS growth aided by Rs205bn order book (2.9x book to bill) and healthy award pipeline in target segments of roads, water supply and urban infra. Company has buit a large 23 project portfolio of HAM assets and is targeting monetisation of 12 projects in FY24. This would strengthen an already strong balance sheet. Analysts of IIFL Capital Services retain estimates and continue to like the name among road contractors. BUY.

Healthy execution and margins in Q4: 

PNC Infra reported inline results in Q4 with revenue of Rs21.1bn (up 10% YoY) and Ebitda margin of 13.4%. FY23 revenue at Rs70bn grew 12% YoY. Contribution from non-road segment – primarily water supply under JJM increased from Rs1.1bn in FY22 to Rs9.25bn in FY23 as the company ramped up execution across 3000 locations in Uttar Pradesh. Execution of road projects remained on track. PAT growth in FY23 was healthy 33% supported by fall in finance charges.

Order book provides healthy growth visibility: 

PNC Infra reported end FY23 order book Rs156bn. Including four HAM projects where CA has yet to be signed and one light rail EPC project won in Haryana, the total order book stands at Rs205bn – 2.9x FY23 revenue. This provides healthy growth visibility with HAM projects likely to receive appointed dates by end calendar 2023. Contribution from water projects is expected to ramp up to over Rs25bn and should support 15% revenue growth for FY24 as per management. FY24 order inflow target is Rs100-120bn from roads, water and light rail.

Targeting HAM project monetisation in FY24: 

Off the sizeable portfolio of 23 HAM assets and 5 BOT/annuity assets, company is looking to monetise 12 projects (11HAM, one BOT road) through direct sale in FY24. Discussions are on with four prospective buyers currently. Completion will further strengthen the already strong balance sheet and PNC should remain a net cash company despite RS12bn equity funding in FY24-25. Working capital increased in FY23 but largely due to receivables from captive HAM where payments have been received in April-23.