HDFC Securities Recommends Buying PNC Infratech

In the latest financial report dated October 03, 2023, HDFC Securities has expressed a bullish sentiment on PNC Infratech and has recommended a “buy” rating on the stock, setting a target price of Rs 452.

PNC Infratech (PNC) has exhibited remarkable growth in its top-line performance, with a 23.1% Compound Annual Growth Rate (CAGR) from FY19 to FY23. The key highlights from PNC’s FY23 annual report include:

  1. Strong Order Book (OB): As of March 2023, PNC’s Order Book stood at INR 205.3 billion, equivalent to approximately 2.9 times its FY23 standalone revenue, marking an all-time high. This substantial OB provides a favorable outlook for revenue generation in the medium term.
  2. Debt Profile: At the standalone level, the company reported gross and net debt of INR 4.5 billion and INR 0.8 billion, respectively, as of March 2023. This translates to a gross Debt-to-Equity (D/E) ratio of 0.11x. It’s worth noting that PNC had a net cash position of INR 3.2 billion in March 2022.
  3. Asset Monetization Plans: PNC Infratech is actively pursuing its plan to monetize 11 Hybrid Annuity Model (HAM) and 1 Build-Operate-Transfer (BOT) projects, and progress in this regard seems to be on track. These transactions are expected to be completed by the end of FY24. The demand for HAM assets remains strong, with several Invit platforms pursuing growth strategies, and recent HAM deal valuations surpassing 1.5 times the Price-to-Book Value (P/BV) of invested equity.

HDFC Securities maintains a “BUY” recommendation for PNC Infratech, citing the company’s all-time high Order Book, strong balance sheet, and anticipated robust inflows from asset monetization. They have increased their target price (TP) for the stock to INR 452 per share, based on a 13x Price-to-Earnings (P/E) multiple for September 2025 earnings and a higher valuation of HAM assets at 1.2 times P/BV. Investors may consider this recommendation as they evaluate potential investment opportunities.

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