Buy This Midcap Infra Stock For 30% Potential Upside: Axis Securities

PNC Infratech Ltd (PNCIL) stock has been recommended for buy by Axis Securities Limited, a leading brokerage firm, with a target price of Rs 430. The brokerage estimates the stock has a 30% upside potential from its current market price; at the time of the companys buy call, the stock was trading at Rs 329 and is now trading at Rs 304 on the National Stock Exchange (NSE). According to the brokerage PNC Infratech Ltd (PNCIL) reported a healthy set of Q2FY22 numbers driven by its superior execution and a robust order book. The company reported revenue of Rs 1,615 Cr (up 53% YoY), EBIDTA of Rs 222 Cr (up 56% YoY), and APAT of Rs 135 Cr (up 95% YoY). It registered EBITDA Margins of 13.7% in Q2FY22 (our estimate: 13.6%) as against 13.5% in Q1FY21. The company reported APAT margins of 8.4% against 6.6% in Q1FY21 while also maintaining its growth momentum.The brokerage has said that PNCIL has an order book of Rs 13,178 Cr (as of 30th Sep 2021), indicating revenue visibility for the next 2 years. With a robust bidding pipeline in EPC and HAM projects along with water projects going forward, we believe PNCIL is well-placed to capture growth opportunities in the sector. With robust order book and better execution prowess, we expect the company to post Revenues/EBITDA/PAT growth of 17%/18%/28% CAGR respectively over FY21-24E.Advertisement Orderbook stands at Rs 13,178 Cr as of Q2FY22 end: Order book break up is as follows: 24% from the roads (Others), 48% from the roads (HAM), and balance 28% (Water projects).Overall margins improve: The companys overall margins improved on YoY/QoQ, driven by better execution and normalising economic activities. The company reported EBITDA and APAT margins of 13.7% and 8.4% against 13.5% and 6.6% YoY.Focus on road projects: The company continues to sharply focus on road projects (both EPC and HAM). However, it intends to continue diversifying to augment revenue and the dirisk its business model further. The company expects good growth from water projects under the Jal Jivan Mission of the government. Currently, the company has 18 projects comprising EPC, HAM, BOT, OMT, and water projects. It has received PCOD in four HAM projects and the balance of 7 projects are under construction. Axis Securities Limited has said in its research report that the Road sector is witnessing significant development on the back of increased government thrust on infrastructure investment as well as due to the unveiling of the Gati Shakti Plan which will provide further momentum to the execution and avoid unnecessary delays. With the ongoing development in the entire infra space, a strong and diversified order book position, efficient execution prowess, asset monetization plan and a clean balance sheet, we expect the companys Revenues/EBITDA/APAT to grow at a CAGR of 17%/18%/28% respectively over FY21-24E. We maintain a BUY on PNCIL and value EPC business at 13 x FY24E EPS and HAM portfolio at 1x book value to arrive at a target price of Rs 430, implying an upside of 30% from CMP. 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.