This Construction Stock Is Pick of The Week To Buy As Suggested By Axis Securities

Investment rationale for PNC Infratech Ltd (PNCIL) according to the brokerage

• As of September 21-end, PNCIL's order book stands robust at Rs 13,178 Cr (2.67x of FY21 revenue) and comprises road projects both EPC and HAM. Furthermore, the company has recently diversified into water infrastructure projects and has received supply projects totaling Rs 4,757 Cr. The order book gives revenue visibility for the next 2-3 years. We expect the company to deliver healthy revenue growth of 17% CAGR over FY21-24E.
• The road construction industry in India is undergoing a paradigm shift with notable investments in the segment and proactive policy support of the government. NHAI asset monetization plan, National Infrastructure Pipeline, and unveiling of the Gati Shakti Plan will provide further momentum to the execution and avoid unnecessary delays. Various initiatives undertaken by the Central government are expected to significantly support the overall development of the road sector moving ahead, thereby creating massive growth opportunities for the company.
• PNCIL is one of the leading EPC contractors in India having a demonstrated project execution experience of more than three decades. Leveraging this, it has efficiently and timely delivered complex and prestigious projects including highways, bridges, flyovers, power transmission lines, airport runways, and development of industrial areas, amongst other. Factoring in better order inflows, we expect the company to maintain its margin profile between 13%-14% over FY21-24E.

Buy With A Target Price of Rs. 350

Axis Securities has claimed in its research report that "Considering strong and diversified order book position, healthy bidding pipeline, new order inflows, emerging opportunities in the construction space, and the company's efficient and timely execution, we expect PNCIL to report Revenue/EBITDA/APAT CAGR of 17%/18%/28% respectively over FY21-FY24E. Stock is currently trading at 12x and 10x FY23E/FY24E EPS which is attractive. We recommend a Buy the stock for a target price of Rs 350 implying an upside of 15% from current market price (CMP)."

Disclaimer

The above stock has been picked from the brokerage report of Axis Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.