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Buy This Small-Cap Infratech Stock For Target Price Of Rs 383, Brokerage Expect Robust 50% Gains

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Anand Rathi, a leading brokerage firm, is bullish on PNC Infratech Limited, a small cap infra company. The brokerage suggests buy the stocks of the company for a target price of Rs 383 apiece. If the stocks of the company are purchased at the current market price, considering the estimated target price, investors can expect a potential gain of 50%.

 

Stock To Buy

Stock To Buy

Current market price PNC Infratech stock is Rs 257 apiece. The current market price is Rs 38 above the 52-week low and Rs 138.9 below the 52-week high, respectively.

The 52 week low of the stock is Rs 331.80 apiece recorded on 11th May 2022 and the 52-week high is Rs 482.45 apiece recorded on 5th August 2021, respectively.

The shares of the company in the previous week have jumped 2.09% whereas, in the past 1 month, the shares witnessed a jump of 5.01%. Over the past 1 year, the shares have fallen 17.06%. However, in the past 3 and 5 years, the shares surged 27.32% and 85.09%, respectively.

PNC Infratech Limited is a small-cap Infrastructure company engaged in construction and contracting work. It has a market capitalization of Rs 6,500.70 crore.

No new orders, but assurance sturdy
 

No new orders, but assurance sturdy

With no orders to cover Q1 execution, the OB shrank ~Rs16.6bn q/q to ~Rs 204bn. Nevertheless, this implies sturdy assurance of 3.1x TTM core-EPC revenues. With ~Rs55bn of revenues targeted for the rest of FY23, and as it intends to keep healthy growth going beyond FY23, management looks to add Rs80bn-100bn in FY23.

Ghaziabad-Aligarh monetised, more in the works

Ghaziabad-Aligarh monetised, more in the works

The much-awaited transaction was closed on 26th May'22. PNC's share (~Rs2.75bn), realised in the quarter, helped make good for a large part of Q1 cash-flow requirements. A bouquet of six hybrid annuities, a BOT-annuity and a BOT-toll with ~Rs9.4bn equity invested is on the block, and discussions are underway with a potential investor. Management seeks to make considerable progress on this by end -FY23.

Net-cash status stays, but with a q/q lower balance

Net-cash status stays, but with a q/q lower balance

The Q1 ~Rs1.14bn equity infusion, a generally slow payment cycle early in the year, and adverse movement in some of the key constituents of working capital meant the net cash-balance dips ~Rs0.3bn q/q. Nevertheless, the balance sheet, with net cash balance of ~Rs1.6bn, is still sturdy, and in shape to effect even better scale.

Valuation & Recommendation

Valuation & Recommendation

PNC's steady ongoing pace of execution enabled its promising start to the year. "We expect its momentum to continue as project execution proceeds and the recently added orders turn contributing in the year. Its steady core-EPC margin in a high-cost context is an augury and indicates its efficiently-managed value chain. Its well-demonstrated execution abilities and adequate growth capital (on the well-set balance sheet) prepare the ground for a better scale. On its sound fundamentals and not-so-demanding valuations, our Buy rating stays with an unchanged Target Price of Rs 383," the brokerage has said.

the brokerage added, "Though we see some potential to our FY23e revenue, we feel it prudent to await more progress regarding approval of DPRs for the rural drinking water-supply orders, and appointed dates for hybrid annuities. Consequently, our current estimates are retained. On these, the stock is available (excl. investments) at a PER of 8.8x FY24e."

According to the brokerage, the risk for the buy call is Slow execution.

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.

Story first published: Saturday, August 13, 2022, 19:17 [IST]
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