Midcap Infra Multibagger Stock To Buy On Strong Orders, Healthy Balance Sheet

Stocks have recovered a little in the past 1-week as fears of inflation gradually recede. Here is a small cap infrastructure stock that can yield good returns in the next few years. Anand Rathi is optimistic on the stock and has suggested a buy, with a price target of Rs 383.

Surging order book, strong additions

According to Anand Rathi, with its recent success on a Rs 23.4 billion water-supply order in Uttar Pradesh and the upwardly revised EPC potential for the earlier water-supply orders, the firm order book rose Rs 26 billion q/q to Rs 147 billion.

"Including the recent seven hybrid annuities (not yet part of the firm OB, pending FCs/ADs), the OB rises to over Rs210bn, and implies assurance for over three years. With FY23 revenue targeted at Rs 72 billion (on 15% growth guidance), it intends to add Rs 80 billion-100 billion more in FY23, to keep assurance intact (and growth going). Additions are likely to be road-heavy," Anand Rathi has said. The firm also noted that the much-awaited Ghaziabad-Aligarh has been monetised. Transaction was closed on May 26'22. Five hybrid annuities and a BOT-annuity are also on the block, and two offers have been received. The InvIT option, too, is on the table.

Healthy pace of executions

According to Anand Rathi, the management seeks to continue the healthy pace of execution and expects FY23 revenue as 15% higher y/y. "It expects the DPR-approved water-supply orders to contribute Rs 15 billion in FY23 (from Rs 1.1 billion in FY22), the AP irrigation order Rs 2 bn, the short-term toll collection contract in excess of Rs 3 bn, and the balance Rs 50bn-55bn from its mainstay, roads. Within roads, it expects the recently added seven hybrid annuity projects to contribute Rs 2 billion," the brokerage has said. The Management highlights that its order book has price-variation/escalation clauses in place and, thus, it does not see any marked variability in its margin performance. Its water-supply orders have escalation clauses in place for the HDPE pipes (main component), and the balance scope is not eligible for any reset for inflationary pressures. It narrowed its guided-to margin range from 13-14% earlier to 13-13.5%.

Buy the stock of PNC with a price target of Rs 383

According to Anand Rathi, with the recent strong additions and upwardly revised EPC potential for its earlier water-supply orders in Uttar Pradesh, PNC's revenue assurance is now comforting. "The balance sheet strength stays and, with the recent monetisation of the Ghaziabad-Aligarh BOT-toll, it is set to turn sturdier. With an augmented OB, the EPC side of the business appears set for an even better scale ahead, and the well-set balance sheet mean capital is unlikely to come as a constraint either for a better EPC scale or equity infusion needs in the asset ownership business. On the benign valuations, proven execution abilities, and healthy mid- to long-term prospects, our Buy rating on the stock of PNC Infratech stays, with a target price of Rs 383," Anand Rathi has said. Our own take is that this stock can be a multibagger stock if held for long-term.

Key financials as estimated by Anand Rathi

	FY 2022-23 (E)	FY 2023-24 (E)
Sales (mn)	71,473	80,242
Net profits	5,648	6273
EPS	17.5	22
Roe	15.6	15
ROCE	22.1	21.1
Price to book	1.6	1.4

Disclaimer

The above stock is picked from the brokerage report of Anand Rathi. Investors are advised caution as the markets have become exceedingly volatile. Neither Greynium Information Technologies, nor the author, nor the brokerage house would be responsible for any