Q3FY24 Review: PNC Infratech: Slower growth amid lack of orders

7 Feb 2024 , 02:25 PM

PNC Infra would likely see slower growth in over next few quarters (mgmt. guidance of 10% for FY24-25) amid sluggish awarding by govt. Expected uptick in awarding backed by a healthy pipeline would be key to meeting OI target of Rs70bn for Feb-Mar and over Rs120bn for FY25 and to driving an acceleration in revenue growth. Monetisation of 12 Projects announced recently should be completed in 2024 and will support equity commitments incrementally. Analysts of IIFL Capital Services cut estimates by 5-7% over FY24-26. Retain BUY. 

Sluggish awards translating into slower growth guidance: 

Following revenue growth of 11% in Q3FY24 and 8.3% in 9M, PNC Infra management guided to full year revenue growth of 10% for FY24. This implies ~13% growth in Q4. FY25 growth is also expected at 10% supported by overall order book of Rs185bn (including HAM project win of ~Rs11bn in Jan-24) off which ~Rs138bn is under execution currently. Management expects margins to remain stable at ~13-13.3% for the existing order book. 

Expects awarding to pick up over Q4 and FY25: 

Company is awaiting bid opening of for 17 projects worth Rs140bn as on date. Management also highlighted bid pipeline of 200 highway projects worth Rs1900bn (HAM, EPC and BOT) from NHAI and MoRTH. These should translate into pick up in awards over Feb-Mar and in FY25 (given the spill over). Company is also targeting highway projects from states and JJM projects in MP, Rajasthan and Chhattisgarh to boost order inflow. If these fructify, revenue growth should accelerate into FY26. Order inflow would be the key monitorable. 

Monetisation of 12 projects to complete over Q2/Q325: 

PNC had signed the SPA for monetising 11 HAM and one BOT project in Jan-24. It expects to complete the transaction over two phases in Aug-24 and Dec-24 with total equity consideration of Rs29.02bn vs committed equity of Rs17.4bn (Rs900m balance to be infused). The proceeds would be utilised to fund the balance equity commitment of Rs10.6bn for existing portfolio and also for future additions.