The company was able to end the financial year 2021 with marginally higher revenues vis-à-vis FY20. This looks good considering revenues for the nine-month ended December had declined by around 12% year-on-year
PNC Infratech Ltd’s March quarter results announced last week were strong, led by better execution. Standalone EPC revenues have increased as much as 42% year-on-year to ₹1,644 crore, higher than analysts’ estimates. EPC is short for engineering, procurement and construction.
The upshot: the company was able to end the financial year 2021 (FY21) with marginally higher revenues vis-à-vis FY20. This looks good considering revenues for the nine-month ended December had declined by around 12% year-on-year. What’s more, PNC Infratech has told analysts it is looking at a 20% year-on-year growth in FY22 in its EPC revenues.
To be sure, some analysts are upbeat about the company’s revenue prospects. “We further think that with a strong order book of Rs16,500 crore (including projects not included in the reported backlog) at end-FY21, PNC Infratech can deliver at least two years of strong revenue growth – significantly ahead of consensus estimates," said Nomura analysts in a report on 28 June. Note that the company’s order book works out to over three times FY21 revenues.
Coming back to the March quarter, PNC Infratech saw 63 basis points expansion in its Ebitda margin to 14.1%. Ebitda is earnings before, interest, tax, depreciation and amortization. One basis point is one-hundredth of a percentage point. For FY22, the management has given an Ebitda margin guidance of 13.5-14%. Note that Ebitda margin for FY21 stood at 13.7%.
So far in this calendar year, PNC Infratech shares have substantially outperformed the Nifty 500 index. Going ahead, monetization remains a key monitorable for investors. As analysts from HDFC Securities Ltd said in a report on 29 June, “PNC would require to infuse ₹350/320/300 crore equity in under construction and recently-won hybrid annuity model (HAM) projects in FY22/23/24E." The capex budgeted for this financial year is Rs125 crore.
“While PNC could fund the equity requirement from internal accruals, we believe monetisation of HAM projects would be key to churn the capital and unlock value," said HDFC Securities’ analysts. It goes without saying that a slowdown in orders remains a key risk for the stock.