PNC Infratech (PNC), is into engineering, procurement and consumption (EPC) and functions on the built-operate-transfer (BoT) model, primarily focuses on roads and airport runways.
The company will benefit from the government’s emphasis on infrastructure development, particularly road construction with no further equity investment in its road BoT portfolio. PNC has developed strong technical and execution capabilities, which reflect in its robust order book.
A strong order inflow and revenue visibility can thus be expected. We expect PNC to enjoy healthy operating profit margin led by few big projects and large fleet of owned machinery.
We estimate PNC’s revenue to grow at 21.1 per cent CAGR during FY15-18E led by top eight projects contributing to about 80 per cent of its total revenue during FY16E and FY17E.
The company’s strong financials will get a substantial boost by way of significant bonus for early completion of the Agra-Firozabad road EPC project (we have not considered the same).
We initiate coverage on PNC with a ‘buy’ rating and SoTP-based target price of Rs.677 with an 18 months perspective.
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