RESULTS REVIEW 3QFY17 16 FEB 2017

PNC Infratech
BUY
INDUSTRY INFRASTRUCTURE Recovery in sight
CMP (as on 15 Feb 2017) Rs 103 PNC Infratech (PNCL) delivered strong 3QFY17 Highlights of the Quarter
numbers with revenue/APAT coming in 14.9/31.8%
Target Price Rs 130
above our estimate. Net debt-free standalone BS,
Orders to move into execution from 4QFY17E: PNCL
expects to receive appointed date for Rs 29.6bn
Nifty 8,725 gradual pickup in slow moving orders and limited
(~61.7% of order backlog) of slow moving orders by
Sensex 28,156 BOT capex are key triggers for further re-rating. Out
Mar-17E. NHAI is compensating land owners in these
KEY STOCK DATA of Rs 36bn worth of projects (~55% order backlog projects as per new Land Bill.
Bloomberg PNCL IN end 2QF17) awaiting Appointed Date, PNCL has
No. of Shares (mn) 257 started work on Aligarh Moradabad project. Aligarh BOT achieves full COD, value all BOTs at 1.2x
P/BV: During 3QFY17, the Aligarh Ghaziabad project
MCap (Rs bn) / ($ mn) 26/394 Appointed date for the Varanasi-Gorakhpur (Rs has achieved full COD, and is now clocking Rs
6m avg traded value (Rs mn) 31 8.7bn) and Koilwar-Bhojpur (Rs 4.5bn) is expected by 4.7mn/day toll collections (~45% lower than
STOCK PERFORMANCE (%) Feb-17E end and that for Nagina Kashipur (Rs estimates). With implementation of overloading, toll
52 Week high / low Rs 135/89 11.6bn), Bhojpur-Buxar (Rs 4.8bn) by Mar-17E. PNCs collection will ramp up to Rs 5.5mn/day. We roll
3M 6M 12M balance sheet remains healthy with standalone net forward BOTs DCF to Mar-18E and value the BOT assets
Absolute (%) (7.6) (7.6) (2.9)
cash of Rs 260mn and a comfortable cash conversion at Rs 27.5/sh (implied 1.2x P/BV).
cycle of ~97 days (as against 92days in 2QFY17).
Relative (%) (14.6) (7.6) (22.5) Near-term outlook: Near-term order execution issues
SHAREHOLDING PATTERN (%) We cut our FY19E EPS estimate by 5.7% owing back may impact financials. With letter of award in sight on
Promoters 56.07 ended order inflows. Maintain BUY with TP of Rs the Rs 29.6bn orders, execution pickup may lead to
FIs & Local MFs 18.31 130/sh (Mar-19E EPS, 1.2x P/BV for BOT assets). PNCL re-rating.
FPIs 6.16
Financial Summary (Standalone)
Public & Others 19.46
Year Ending March (Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%) FY16 FY17E FY18E FY19E
Source : BSE
Net Sales 4,636 5,215 (11.1) 3,599 28.8 20,142 18,690 22,722 26,839
EBITDA 602 679 (11.4) 463 29.9 2,660 2,429 2,950 3,492
APAT 420 325 29.5 284 48.2 1,518 1,637 1,555 1,757
Diluted EPS (Rs) 1.6 1.3 29.5 1.1 48.2 5.9 6.4 6.1 6.8
P/E (x) 17.4 16.1 17.0 15.0
Parikshit D Kandpal EV / EBITDA (x) 9.6 10.7 8.8 7.5
parikshitd.kandpal@hdfcsec.com RoE (%) 14.6 11.2 9.6 9.9
+91-22-6171-7317 Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
 PNC INFRATECH : RESULTS REVIEW 3QFY17

Net Revenues/EBITDA stood Standalone Quarterly Financial

at ~14.9/13.8% ahead of Particulars (Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%) 9MFY17 9MFY16 YoY (%)
estimates Net Sales 4,636 5,215 (11.1) 3,599 28.8 13,386 14,254 (6.1)
Material Expenses (3,228) (3,861) (16.4) (2,552) 26.5 (9,534) (10,507) (9.3)
MAT credit of Rs 94.8mn Employee Expenses (300) (219) 36.7 (213) 40.4 (756) (622) 21.5
and Rs 252.1mn tax write Other Operating Expenses (507) (456) 11.3 (370) 37.1 (1,360) (1,234) 10.2
back for FY14 resulted in net EBITDA 602 679 (11.4) 463 29.9 1,736 1,891 (8.2)
tax credit of Rs 258.3mn Depreciation (138) (139) (0.6) (134) 2.7 (393) (381) 3.1
after MAT provisions of Rs EBIT 464 540 (14.1) 329 41.0 1,343 1,510 (11.1)
108.3mn. Other Income 85 35 138.5 101 (15.9) 360 87 311.9
Interest Cost (40) (81) (51.1) (58) (32.2) (119) (244) (51.1)
Residual tax write back for PBT 509 495 2.9 371 37.1 1,583 1,353 17.0
FY15 is Rs 300mn which will Tax 258 (170) (251.5) (20) (1,400.7) 176 (463) (138.0)
be accounted for in FY18E Reported PAT 767 325 136.5 352 118.3 1,759 890 97.7
EO Items (347) - - (68) - (637) - -
Reported PAT stood at Rs APAT 420 325 29.5 284 48.2 1,122 890 26.1
767mn owing to net tax Source: Company, HDFC sec Inst Research
reversal of Rs 258.3mn. Margin Analysis
MARGIN ANALYSIS 3QFY17 3QFY16 YoY (bps) 2QFY17 QoQ (bps) 9MFY17 9MFY16 YoY (bps)
PNC 3QFY17 APAT was Material Expenses % Net Sales 69.6 74.0 (442) 70.9 (130) 71.2 73.7 (249)
~31.8% ahead of our Employee Expenses % Net Sales 6.5 4.2 226 5.9 53 5.6 4.4 128
estimates Other Ope Expenses % Net Sales 10.9 8.7 220 10.3 66 10.2 8.7 150
EBITDA Margin (%) 13.0 13.0 (4) 12.9 11 13.0 13.3 (30)
YTDFY17 order inflows stood Tax Rate (%) (50.7) 34.4 (8,517) 5.3 (5,608) (11.1) 34.2 (4,535)
at Rs 13.7bn, excluding APAT Margin (%) 9.1 6.2 284 7.9 118 8.4 6.2 214
Rs19bn L1 status in Lucknow Source: Company, HDFC sec Inst Research
Ballia Expressway Package
4. Order backlog is ~Rs
56.8bn excluding L1 of Rs
19bn and including Rs 8.8bn
of HAM project

On a standalone basis, PNC

has become net debt-free
with net cash of Rs 260mn

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 PNC INFRATECH : RESULTS REVIEW 3QFY17

We expect PNCs order book Order Book To Multiply 1.6x Over FY17-19E EBIDTA Margins To Remains Stable At 13%
to multiply 1.6x over FY17- Order book (Rs mn) Revenues (Rs mn) EBITDA Margins (%) PAT Margins (%) - RHS
19E Book-to-bill ratio (x) - RHS Rs mn
145,000 6 16.0
Rs mn
14.0
Roads EPC and HAM will be 125,000 5
12.0
key drivers for order-book 105,000
4 10.0
growth 85,000 8.0
3
65,000 6.0
PNC is targeting Rs 40bn 2
45,000 4.0
order inflow in FY17E
25,000 1 2.0
-
EBITDA and PAT margins to 5,000 0

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E
remain at 13-13.2% and 6-
FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E
6.5% over FY17-19E
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research
Expect PNC to add debt over
FY17-19E to fund its HAM Expect FY19E Net D/E Ratio Of -0.02x Expect FY19E NWC Cycle Of 149 days
portfolio. However, FY19E- Net Debt (Rs mn) Net D/E Ratio (x) - RHS Cash flow from operations - LHS NWC Cycle - RHS
end net cash is estimated at 3,500 0.60 3,500 Rs mn Rs mn 180
Rs 383mn and net D/E ratio 0.50 3,000 160
of -0.02x 3,000 2,500
0.40 140
2,000 120
2,500 0.30 1,500
Expect net working capital 100
2,000 0.20 1,000
cycle of 149 days in FY19E 500
80
0.10
and cash flow from 1,500 0 60
-
operations to improve to -500 40
1,000
Rs1,350mn (0.10) -1,000 20
500 (0.20) -1,500 0

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E
FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Page | 3
 PNC INFRATECH : RESULTS REVIEW 3QFY17

Strong BOT portfolio Value BOTs at Rs 27.5/sh (1.2x P/BV)

The Aligarh-Ghaziabad BOT
has achieved full COD in PNCL toll collection/day stood at Rs 13.9mn during than expected rampup in traffic and insufficient
3QFY17, resulting in 20% 3QFY17 (-0.2% QoQ, 67 days operation, overloading charge collection, has taken away the
increase in toll. The toll demonetization impact). This has now improved to Rs benefit of loss funding. Out of Rs 763mn of expected
collection now stands at Rs 16.6mn/day (+19.4% MoM in Jan-17E). loss PNCL share will be Rs 267mn. The losses would
4.7mn, and with reduce in FY18E with traffic and tariff growth of ~9%.
Aligarh-Ghaziabad project has been one of the key
implementation of pain points in PNCs BOT portfolio. PNCL has now
Raebareli-Jaunpur annuity project: PNC received COD
overloading may reach Rs achieved full COD and taken ~20% toll hike. This has
for the Raebareli-Jaunpur BOT project on March 8,
5.5mn/day toll resulted in toll collection ramping to Rs 4.7mn/day.
2016. The project has achieved COD three months
With overloading charges implementation the
ahead of the June-16 deadline. The management
This is ~39% lower than our collection may reach Rs 5.5mn/day, still 39% short of
would receive Rs 370mn as bonus of which Rs 185mn
expectation of Rs 9mn/day bid estimate of Rs 9mn/day toll collection.
will come to PNCL.
collections PNCL has issued Rs 1.1bn of warrants as loss funding
for Aligarh-Ghaziabad project. This was supposed to We have rolled over our DCF valuation to FY18E end.
There is no pending equity reduce cash loss which is now pegged at Rs 763mn for We have valued PNCs BOT portfolio at Rs 27.5/sh
to be invested in the FY17E vs Rs 634mn in FY16. Demonetization, lower (1.2x P/BV) vs Rs 26.1/share earlier (1.4x P/BV).
projects. Total equity
invested is Rs 5.8bn (PNC PNC Equity Project NPV (PNCL Per share
PNC Stake Implied P/B
share) including Rs 1.2bn of Project
(%)
WACC (%) Invested Value (Rs Share) INR value
(x)
loss funding to Aligarh- (INR mn) mn) mn (Rs/sh)
Ghaziabad project Bareilly-Almora-Bagheshwar 100.0 13.5 750 1,388 1,388 5.4 1.9
Kanpur-Kabrai 100.0 13.5 675 2,533 2,533 9.9 3.8
Gwalior Bhind 100.0 13.5 780 1,396 1,396 5.4 1.8
We roll forward our DCF for Aligarh-Ghaziabad 35.0 13.5 1,860 (3,585) (1,255) (4.9) (1.8)
BOT project to FY18E. PNCs Raebareli-Jaunpur 100.0 13.5 1,395 768 768 3.0 0.6
total asset portfolio is Narela Industrial Estate 100.0 13.5 350 971 971 3.8 2.8
valued at Rs 27.5/sh (vs. Kanpur-Ayodhya 100.0 13.5 - 1,265 1,265 4.9 -
earlier value of Rs 26/sh). Total 5,810 4,737 7,067 27.5 1.2
Source: Company, HDFC sec Inst Research
We have cut valuation
estimates of Aligarh-
Ghaziabad to Rs 4.9/sh vs
Rs 1.1/sh earlier

Page | 4
 PNC INFRATECH : RESULTS REVIEW 3QFY17

Key Assumptions And Estimates (Standalone)

We expect 25.2% FY17-19E
order backlog CAGR Key Assumptions (Rs mn) FY17E FY18E FY19E Comments
We expect 25.2% FY17-19E order book CAGR on back of strong NHAI &
Closing Order Book 78,286 100,873 122,741
State EPC roads pipeline of Rs 400bn during 4QFY17E
Order Book Growth (%) 41.8 28.9 21.7
New Order Booking 41,755 45,309 48,708 Received Rs 13.7bn YTDFY17 and is L1 in Rs 19bn of projects
Book-to-bill Ratio 4.2 4.4 4.6 Book to bill ratio to improve on new orders wins
FY17-19E revenue CAGR
Strong order book accretion to result in FY17-19E with revenue CAGR of
19.8%, EBIDTA CAGR 19.9% Total Revenue 18,690 22,722 26,839
19.8%
Growth (%) (7.2) 21.6 18.1
EBIDTA 2,429 2,950 3,492 FY17-19E EBIDTA CAGR of 19.9%
EBIDTA Margin (%) 13.0 13.0 13.0 Margins to remain in 13-13.2% range
Depreciation 541 694 779
Financial Charges 168 280 453 Borrowing cost to grow at 64.3% FY17-19E CAGR
Other Income 436 311 323
EBIDTA margins to be PBT 2,156 2,287 2,583 FY17-19E PBT CAGR of 9.5%
maintained in the 13-13.2% PBT Margin (%) 11.5 10.1 9.6 PBT margins to decline on back of higher finance cost
range Tax (216) 343 387 Continue to pay MAT
Tax Rate (%) (10.0) 15.0 15.0
APAT 1,637 1,555 1,757 FY17-19E APAT CAGR of 3.6% adjusted for full tax
Net margin (%) 8.8 6.8 6.5
Gross Block Turnover 3.5 3.3 3.4 Improvement on account of new orders inflow
Debtor Days 85 90 90 May marginally deteriorate
FY17-19E APAT CAGR of Higher revenue growth, robust client advance to result in higher positive
CFO a 3,038 321 1,350
3.6% cash flow from operations
CFI b (3,300) 250 (850)
FCF - a+b (262) 571 500
CFF c 785 1,048 187
Total Change In Cash - a+b+c 524 1,619 688 Net cash position doesnt change debt materially
Source : HDFC sec Inst Research

Page | 5
 PNC INFRATECH : RESULTS REVIEW 3QFY17

Key Assumptions And Estimates (Consolidated)

FY17-19E revenue CAGR of
17.5% Key Assumptions (Rs mn) FY17E FY18E FY19E Comments
Income
Toll revenue excludes Aligarh Ghaziabad. Full year revenue impact of toll
Toll Revenue 5,668 6,306 6,775 & annuity projects to reflect from FY17E with all the projects being
operational. FY17-19E CAGR of 9.3%
This will be driven by toll Expect execution to materially pick up during FY17-19E with revenue
revenue CAGR of 9.3% and Construction Revenue 18,690 22,722 26,839
CAGR of 19.8%
EPC revenue CAGR of 19.8% Total Revenue 24,358 29,028 33,614 Overall FY17-19E revenue CAGR of 17.5%
Growth (%) 1.7 19.2 15.8
EBIDTA (Toll) 3,051 3,441 3,243 FY17-19E Toll EBIDTA CAGR of 3.1%
EBIDTA (Construction) 2,429 2,950 3,492 FY17-19E EBIDTA CAGR of 19.9%
FY17-19E EBIDTA CAGR of EBIDTA Margin Toll (%) 53.8 54.6 47.9
BOT margins to improve. Dip in FY19E owing to maintenance in Narela
10.9% largely driven by toll and other road projects
EBIDTA CAGR of 3.1% and EBIDTA Margin Construction (%) 13.0 13.0 13.0
EPC EBIDTA CAGR of 19.9% Total EBIDTA 5,480.1 6,391.0 6,735.2 Overall FY17-19E EBIDTA CAGR of 10.9%
EBIDTA Margin 22.5 22.0 20.0
Depreciation 1,739 2,057 2,216 Growth in line with BOT assets capitalization
Financial Charges 2,053 2,116 2,194 Interest expense largely driven by BOT projects
PBT 2,124 2,530 2,649 FY17-19E PBT CAGR of 11.7%
PBT Margin (%) 8.7 8.7 7.9
Tax (145) 442 480
With most of the BOT
Tax Rate (%) (6.8) 17.5 18.1
projects turning profitable
Minority/Profit from Asso/EO. (953.0) (485.6) (442.2)
from FY19E, FY17-19E net
APAT 1,316 1,602 1,726 FY17-19E PAT CAGR of 14.5% as Aligarh Ghaziabad losses reduce
profit is expected to multiply
Net Margin (%) 5.4 5.5 5.1
1.3x Impacted by BOT project capitalization. Since these are concession
Gross Block Turnover 0.9 0.9 1.1
projects the asset turn is low as revenue is realized over life of the project
Debtor Days 76 77 78 Stable debtor days
Higher revenue growth and full impact of high margin BOT's to result in
CFO a 3,694 4,686 4,946
Net cash position to remain higher positive cash flow from operations
strong CFI b (4,646) (850) (850)
FCF - a+b (952) 3,836 4,096
CFF c 883 (3,896) (2,532)
Total change in cash - a+b+c (69) (60) 1,563 Net cash position to remain strong
Source : HDFC sec Inst Research, P Project segment EBIDTA

Page | 6
 PNC INFRATECH : RESULTS REVIEW 3QFY17

Change in Estimates (Standalone)

With slow order intake and FY17E FY17E % FY18E FY18E % FY19E FY19E %
delay in Rs 24bn of order Rs mn
New Old Change New Old Change New Old Change
backlog moving into Revenues 18,690 19,567 (4.5) 22,722 23,788 (4.5) 26,839 28,454 (5.7)
execution we cut our EBIDTA 2,429 2,549 (4.7) 2,950 3,143 (6.2) 3,492 3,757 (7.1)
standalone revenue EBIDTA Margins (%) 13.0 13.0 (3.3) 13.0 13.2 (23.1) 13.0 13.2 (19.4)
estimate by 4-6% over FY17- APAT 1,637 1,443 13.5 1,555 1,545 0.6 1,757 1,862 (5.7)
19E. Lower interest expense Adj. EPS (INR) 6.4 5.6 13.5 6.06 6.02 0.6 6.8 7.3 (5.7)
and higher OI to result in Source: Company, HDFC sec Inst Research
limited EPS impact

Change in Estimates (Consolidated)

FY17E FY17E % FY18E FY18E % FY19E FY19E %
Rs mn
New Old Change New Old Change New Old Change
Consolidated EPS has been Revenues 24,358 25,235 (3.5) 29,028 30,102 (3.6) 33,614 35,245 (4.6)
cut on account of losses in EBIDTA 5,480 5,601 (2.2) 6,391 6,592 (3.0) 6,735 7,017 (4.0)
Aligarh BOT and major EBIDTA Margins (%) 22.5 22.2 30.5 22.0 21.9 11.8 20.0 19.9 12.8
maintenance in BOT assets APAT 1,316 1,316 0.1 1,602 1,692 (5.3) 1,726 1,928 (10.5)
Adj. EPS (INR) 5.1 5.1 0.1 6.2 6.6 (5.3) 6.7 7.5 (10.5)
Source: Company, HDFC sec Inst Research

Page | 7
 PNC INFRATECH : RESULTS REVIEW 3QFY17

Outlook and valuation

Reduce Target price to Rs 130/sh, implies ~26.2% upside
We value standalone EPC
business at Rs 103/share
(15x one-year forward
Mar-19E EPS)
We value PNCs BOT
portfolio at Rs 28/share
(1.2x invested equity)
Our target standalone P/E
multiple is in line with road
EPC peers, such as KNR
Construction and J Kumar
Infra
We have valued PNC standalone on P/E basis in line
with its road EPC peers, namely KNR/JKIL/Sadbhav, at
15x one-year forward Mar-19E. Our rationale is (1) a
robust order book with ~1.6x increase over the FY17-
19E period to Rs 122.7bn, (2) A strong balance sheet
(3QFY17 standalone net D/E at -0.09x, (3) Fully
invested BOT portfolio, and (4) high share of NHAI EPC
roads in the order book will result in lower working
capital demand, as these projects have 10% interest-
free client advances.
Higher-than-estimated order intake may result in
further stock re-rating as PNC has (1) a diversified
presence in roads and dedicated freight corridor, the
biggest beneficiary of government spending, (2) strong
execution capability, which provides scope for earning
early completion bonus (3-6% of project cost) leading
to EBIDTA margin expansion, and (3) likely support
from the captive order book in lieu of any contraction
in future roads EPC orders.
While the NHAI pipeline remains strong at about Rs
950bn annually, PNCs home state Uttar Pradesh is
coming up with Rs 250bn worth of road projects to be
awarded over the next two years. A strong setup in UP
provides strong order intake tailwinds for the
company.
We have valued PNCs toll projects using 13.5%
discount rate for arriving at NPV of the projects. We
value the BOT business at Rs 28/sh (1.2x of PNC
invested equity). We remain cautious on the traffic
pick-up in the Aligarh-Ghaziabad BOT project, as
current collections are about 50% lower than estimate.
Even with overloading and full COD, the collections
may remain ~39% below estimates.
We maintain BUY with SOTP of Rs 130/share
(previous TP Rs 126/sh). We value the (1) Standalone
EPC business at Rs 103/share (15x one-year forward
Mar-19E EPS, roll forward from Sep-18E), and (2) BOT
projects at Rs 28/share, roll forward our DCF to Mar-
18E.

SOTP Valuation
NEW OLD
Valuation Mar-19E Valuation
Segment Multiple Value per Share Value per Share
Methodology Adjusted PAT (INR mn)
(INR) (INR)
We maintain BUY on PNC Standalone construction - EPC Mar-19E P/E 1,757 15 26,350 103 100
with SOTP-based target BOT Value FCFE Mar-19E 7,067 28 26
price of Rs 130/sh SOTP Value 33,417 130 126
Source: HDFC sec Inst Research

Page | 8
 PNC INFRATECH : RESULTS REVIEW 3QFY17

Income Statement (Standalone) Balance Sheet (Standalone)

Year ending March (Rs mn) FY15 FY16 FY17E FY18E FY19E Year ending March (Rs mn) FY15 FY16 FY17E FY18E FY19E
Net Revenues 15,610 20,142 18,690 22,722 26,839 SOURCES OF FUNDS
Growth (%) 35.5 29.0 (7.2) 21.6 18.1 Share Capital - Equity 398 513 513 513 513
Material Expenses 5,717 9,140 6,598 8,066 9,501 Reserves 6,786 13,110 14,998 16,459 18,171
Employee Expenses 737 836 1,029 1,183 1,361 Total Shareholders Funds 7,184 13,623 15,511 16,972 18,684
Other Operating Expenses 6,990 7,506 8,635 10,523 12,486 Long Term Debt 528 117 117 117 117
EBITDA 2,166 2,660 2,429 2,950 3,492 Short Term Debt 3,003 - 1,000 2,500 3,300
EBITDA Margin (%) 13.9 13.2 13.0 13.0 13.0 Total Debt 3,530 117 1,117 2,617 3,417
EBITDA Growth (%) 52.7 22.8 (8.7) 21.5 18.4 Net Deferred Taxes 4 (30) (30) (30) (30)
Depreciation 364 525 541 694 779 Long Term Provisions & Others 2,499 1,598 1,520 1,445 1,374
EBIT 1,803 2,135 1,887 2,256 2,713 TOTAL SOURCES OF FUNDS 13,218 15,308 18,118 21,004 23,446
Other Income (Including EO Items) 138 202 436 311 323 APPLICATION OF FUNDS
Interest 462 332 168 280 453 Net Block 2,105 2,125 3,784 3,940 4,011
PBT 1,478 2,004 2,156 2,287 2,583 CWIP 70 19 19 19 19
Tax (Incl Deferred) 475 (423) (216) 343 387 Investments 4,235 4,644 5,744 4,644 4,644
RPAT 1,004 2,427 2,371 1,944 2,196 Total Non-current Assets 6,410 6,788 9,546 8,602 8,673
EO (Loss) / Profit (Net Of Tax) (49) (910) (734) (389) (439) Inventories 2,225 2,364 2,304 2,801 3,309
APAT 954 1,518 1,637 1,555 1,757 Debtors 3,667 3,763 4,352 5,603 6,618
APAT Growth (%) 45.3 59.0 7.9 (5.0) 12.9 Other Current Assets 3,263 4,988 4,620 5,678 6,707
Adjusted EPS (Rs) 3.72 5.92 6.38 6.06 6.85 Cash & Equivalents 212 971 1,494 3,113 3,800
EPS Growth (%) 45.3 59.0 7.9 (5.0) 12.9 Total Current Assets 9,367 12,085 12,770 17,195 20,434
Source: Company, HDFC sec Inst Research Creditors 1,081 1,062 1,024 1,245 1,471
Other Current Liabilities & Provns 1,478 2,503 3,175 3,548 4,191
Total Current Liabilities 2,559 3,565 4,199 4,793 5,662
Net Current Assets 6,808 8,520 8,571 12,402 14,772
TOTAL APPLICATION OF FUNDS 13,218 15,308 18,118 21,004 23,446
Source: Company, HDFC sec Inst Research

Page | 9
 PNC INFRATECH : RESULTS REVIEW 3QFY17

Cash Flow (Standalone) Key Ratios (Standalone)

Year ending March (Rs mn) FY15 FY16 FY17E FY18E FY19E FY15 FY16 FY17E FY18E FY19E
Reported PBT 1,478 2,004 2,156 2,287 2,583 PROFITABILITY (%)
Non-operating & EO items 9 (100) - - - GPM 63.4 54.6 64.7 64.5 64.6
Interest expenses 373 249 (268) (31) 130 EBITDA Margin 13.9 13.2 13.0 13.0 13.0
APAT Margin 6.1 7.5 8.8 6.8 6.5
Depreciation 364 525 541 694 779
RoE 14.2 14.6 11.2 9.6 9.9
Working Capital Change (1,094) (1,465) 394 (2,286) (1,754) RoIC (or Core RoCE) 14.0 26.7 19.1 14.5 15.4
Tax Paid (498) - 216 (343) (387) RoCE 11.0 19.8 15.3 11.2 11.6
OPERATING CASH FLOW ( a ) 632 1,212 3,038 321 1,350 EFFICIENCY
Capex (1,012) (394) (2,200) (850) (850) Tax Rate (%) 32.1 (21.1) (10.0) 15.0 15.0
Free cash flow (FCF) (380) 818 838 (529) 500 Fixed Asset Turnover (x) 4.1 4.7 2.9 3.1 3.3
Investments (636) (325) (1,100) 1,100 - Inventory (days) 52.0 42.8 45.0 45.0 45.0
INVESTING CASH FLOW ( b ) (1,648) (719) (3,300) 250 (850) Debtors (days) 85.8 68.2 85.0 90.0 90.0
Debt Issuance/(Repaid) 784 (3,413) 1,000 1,500 800 Other Current Assets (days) 76.3 90.4 90.2 91.2 91.2
Payables (days) 25.3 19.2 20.0 20.0 20.0
Interest Expenses (462) (332) 268 31 (130)
Other Current Liab & Provns
FCFE (58) (2,927) 2,107 1,002 1,171 35.5 45.9 62.0 57.0 57.0
(days)
Share Capital Issuance - 4,172 (0) 0 0 Cash Conversion Cycle (days) 153.3 136.3 138.2 149.2 149.2
Dividend (93) (161) (483) (483) (483) Debt/EBITDA (x) 1.6 0.0 0.5 0.9 1.0
FINANCING CASH FLOW ( c ) 229 265 785 1,048 187 Net D/E (x) 0.46 (0.06) (0.02) (0.03) (0.0)
NET CASH FLOW (a+b+c) (788) 759 524 1,619 688 Interest Coverage (x) 3.9 6.4 11.3 8.1 6.0
Source: Company, HDFC sec Inst Research PER SHARE DATA (Rs)
EPS 3.7 5.9 6.4 6.1 6.8
CEPS 5.3 11.5 11.4 10.3 11.6
Dividend 1.5 2.5 1.5 1.5 1.5
Book Value 28.0 53.1 60.5 66.2 72.8
VALUATION
P/E (x) 27.7 17.4 16.1 17.0 15.0
P/BV (x) 3.7 1.9 1.7 1.6 1.4
EV/EBITDA (x) 13.7 9.6 10.7 8.8 7.5
EV/Revenues (x) 1.9 1.3 1.4 1.1 1.0
OCF/EV (%) 2.1 4.7 11.7 1.2 5.2
FCF/EV (%) (1.3) 3.2 3.2 (2.0) 1.9
FCFE/Mkt Cap (%) (0.2) (11.1) 8.0 3.8 4.4
Dividend Yield (%) 1.5 2.4 1.5 1.5 1.5
Source: Company, HDFC sec Inst Research

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 PNC INFRATECH : RESULTS REVIEW 3QFY17

Income Statement (Consolidated) Balance Sheet (Consolidated)

Year ending March (Rs mn) FY15 FY16 FY17E FY18E FY19E Year ending March (Rs mn) FY15 FY16 FY17E FY18E FY19E
Net Revenues 18,609 23,946 24,358 29,028 33,614 SOURCES OF FUNDS
Growth (%) 36.8 28.7 1.7 19.2 15.8 Share Capital - Equity 398 513 513 513 513
Material Expenses 6,174 9,150 9,214 10,932 13,032 Reserves 8,313 12,584 14,333 16,023 17,888
Employee Expenses 814 953 1,029 1,183 1,361 Total Shareholders Funds 8,711 13,097 14,846 16,536 18,401
Other Operating Expenses 8,823 9,770 8,635 10,523 12,486 Minority Interest 1 1 1 1 1
EBITDA 2,799 4,073 5,480 6,391 6,735 Long Term Debt 13,066 16,509 18,193 14,901 13,739
EBITDA Margin (%) 15.0 17.0 22.5 22.0 20.0 Short Term Debt 3,859 - 1,117 2,617 3,417
EBITDA Growth (%) 59.5 45.5 34.5 16.6 5.4 Total Debt 16,924 16,509 19,310 17,518 17,156
Depreciation 603 1,091 1,739 2,057 2,216 Net Deferred Taxes 10 (32) (32) (32) (32)
EBIT 2,196 2,983 3,742 4,334 4,520 Long Term Provisions & Others 2,587 1,612 1,640 1,954 2,263
Other Income (Including EO Items) 121 166 436 311 323 TOTAL SOURCES OF FUNDS 28,232 31,187 35,764 35,977 37,790
Interest 925 1,287 2,053 2,116 2,194 APPLICATION OF FUNDS
PBT 1,392 1,862 2,124 2,530 2,649 Net Block 6,833 22,880 25,787 24,580 23,215
Tax (Incl Deferred) 479 (430) (145) 442 480 CWIP 14,822 19 19 19 19
RPAT 913 2,292 2,269 2,087 2,168 Investments 938 656 435 338 335
Minority Interest (0) 0 - - - Total Non-current Assets 22,593 23,555 26,241 24,937 23,569
Profit/Loss from Associates - (131) (221) (97) (3) Inventories 2,225 2,364 2,453 3,010 3,591
EO Items - (814) (732) (389) (439) Debtors 2,644 4,121 5,072 6,105 7,140
APAT 913 1,347 1,316 1,602 1,726 Other Current Assets 3,101 4,768 5,768 6,668 7,568
APAT Growth (%) 65.5 47.5 (2.3) 21.7 7.8 Cash & Equivalents 411 1,066 997 937 2,500
Adjusted EPS (Rs) 17.8 26.3 5.1 6.2 6.7 Total Current Assets 8,381 12,319 14,289 16,720 20,798
EPS Growth (%) 65.5 47.5 (80.5) 21.7 7.8 Creditors 1,111 2,046 2,081 2,481 2,872
Source: Company, HDFC sec Inst Research Other Current Liabilities & Provns 1,631 2,639 2,685 3,200 3,705
Total Current Liabilities 2,742 4,686 4,766 5,680 6,577
Net Current Assets 5,639 7,633 9,523 11,040 14,221
TOTAL APPLICATION OF FUNDS 28,232 31,187 35,764 35,977 37,790
Source: Company, HDFC sec Inst Research

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 PNC INFRATECH : RESULTS REVIEW 3QFY17

Cash Flow (Consolidated) Key Ratios (Consolidated)

Year ending March (Rs mn) FY15 FY16 FY17E FY18E FY19E FY15 FY16 FY17E FY18E FY19E
Reported PBT 1,392 1,862 2,124 2,530 2,649 PROFITABILITY (%)
Non-operating & EO items (60) (154) (436) (311) (323) GPM 66.8 61.8 62.2 62.3 61.2
Interest expenses 925 1,287 2,053 2,116 2,194 EBITDA Margin 15.0 17.0 22.5 22.0 20.0
Depreciation 603 1,091 1,739 2,057 2,216 APAT Margin 4.9 9.6 9.3 7.2 6.5
Working Capital Change 107 (5,400) (1,932) (1,263) (1,309) RoE 11.6 21.0 16.2 13.3 12.4
Tax Paid (500) 388 145 (442) (480) RoIC (or Core RoCE) 5.4 12.5 11.6 10.3 10.6
OPERATING CASH FLOW ( a ) 2,468 (925) 3,694 4,686 4,946 RoCE 6.5 13.0 13.3 10.7 10.7
Capex (9,862) (2,331) (4,646) (850) (850) EFFICIENCY
Free cash flow (FCF) (7,394) (3,257) (952) 3,836 4,096 Tax Rate (%) 34.4 (23.1) (6.8) 17.5 18.1
Investments 114 303 Fixed Asset Turnover (x) 2.1 0.9 0.8 0.9 1.0
INVESTING CASH FLOW ( b ) (9,749) (2,028) (4,646) (850) (850) Inventory (days) 43.6 36.0 36.8 37.9 39.0
Debt Issuance/(Repaid) 7,484 2,670 2,800 (1,792) (361) Debtors (days) 51.9 62.8 76.0 76.8 77.5
Interest Expenses (855) (1,287) (1,617) (1,804) (1,871) Other Current Assets (days) 60.8 72.7 86.4 83.8 82.2
FCFE (766) (1,874) 231 240 1,863 Payables (days) 21.8 31.2 31.2 31.2 31.2
Share Capital Issuance - 2,387 - - - Other Current Liab & Provns
32.0 40.2 40.2 40.2 40.2
(days)
Dividend (93) (161) (300) (300) (300)
Cash Conversion Cycle (days) 102.6 100.1 127.8 127.0 127.3
FINANCING CASH FLOW ( c ) 6,536 3,609 883 (3,896) (2,532)
Debt/EBITDA (x) 6.0 4.1 3.5 2.7 2.5
NET CASH FLOW (a+b+c) (745) 655 (69) (60) 1,563
Net D/E (x) 1.9 1.2 1.2 1.0 0.8
Closing Cash & Equivalents 411 1,066 997 937 2,500
Interest Coverage (x) 2.4 2.3 1.8 2.0 2.1
Source: Company, HDFC sec Inst Research
PER SHARE DATA (Rs)
EPS 17.8 26.3 5.1 6.2 6.7
CEPS 29.6 47.5 59.5 71.3 76.8
Dividend 1.0 1.0 1.0 1.0 1.0
Book Value 169.8 255.3 289.3 322.3 358.6
VALUATION
P/E (x) 5.8 3.9 20.1 16.5 15.3
P/BV (x) 0.6 0.4 0.4 0.3 0.3
EV/EBITDA (x) 7.8 5.1 4.3 3.4 3.0
EV/Revenues (x) 1.2 0.9 1.0 0.8 0.6
OCF/EV (%) 11.3 (4.5) 15.7 21.4 24.8
FCF/EV (%) (33.9) (15.7) (4.0) 17.5 20.5
FCFE/Mkt Cap (%) (14.5) (35.5) 4.4 4.5 35.3
Dividend Yield (%) 1.0 1.0 1.0 1.0 1.0
Source: Company, HDFC sec Inst Research

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 PNC INFRATECH : RESULTS REVIEW 3QFY17

RECOMMENDATION HISTORY
PNC Infratech TP
Date CMP Reco Target
150 30-Mar-16 99 BUY 125
140 31-May-16 114 BUY 132
130 26-Aug-16 121 BUY 144
120 14-Dec-16 105 BUY 126
110 16-Feb-17 103 BUY 130
100
90 Rating Definitions
80
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Apr-16
Feb-16

Sep-16

Feb-17
Jun-16

Jul-16
Mar-16

Dec-16
Oct-16
Aug-16

Nov-16

Jan-17
May-16

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 PNC INFRATECH : RESULTS REVIEW 3QFY17

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