Why PNC Infratech Analyst Sees 25% Upside Despite Q3 Earnings Miss

HDFC Securities noted that PNC Infratech's Q3FY23 results missed its estimates on all fronts but said that the company has a strong order book at ₹17,800 crore.

The PNC Infratech Analyst: HDFC Securities analyst team led by Parikshit D Kandpal maintained the ‘buy' rating for the stock increasing the price target to ₹426 from ₹410. An over 26% upside from the stock's last closing price of ₹323.90.

The PNC Infratech Thesis: The brokerage firm noted that the company's standalone revenue of ₹1,636.7 crore this quarter — a 6.9% year-over-year increase — missed its estimates by 5%. The company's EBITDA and net profits also missed the firm's estimates by 7.9% and 10.1% respectively.

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However, the firm highlighted that the construction giant has now received appointment dates (start dates for construction projects) for five of the Hybrid Annuity (HAM) Projects of the National Highways Authority of India (NHAI). The appointment dates for the remaining two projects are expected by the end of this financial year.

The analysts also noted that the company has residual equity requirements of ₹940 Crore for all the HAM projects in the portfolio up until FY25.

In their research note, the brokerage firm noted that the company has selected 11 HAM and 1 Build-Operate and Transfer projects for monetisation purposes. The note further adds that the company has received interest from various investors, and accounting for a slight delay in the monetisation plan, the deal is expected to be closed in FY24. 

It is also worth noting that this year's budget increased focus on infrastructure, which can spell good news for the company in terms of strong order inflows. The government is also expected to open bids for several projects in Q4FY23.

Price Action: Shares of PNC Infratech were down 2.23% at ₹323.90 as the markets closed on Thursday.

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