INITIATING COVERAGE30 MAR 2016 PNC Infratech BUY INDUSTRY INFRASTRUCTURE CMP (as on 29 Mar 2016) Rs 496 Target Price Rs 625 Nifty 7,597 Sensex 24,900 KEY STOCK DATA Bloomberg PNCL IN No. of Shares (mn) 51 MCap (Rs bn) / ($ mn) 25/382 6m avg traded value (Rs mn) 19 STOCK PERFORMANCE (%) 52 Week high / low Rs 558/346 3M 6M 12M Absolute (%) (7.1) 1.9 - Relative (%) (2.6) 5.3 - SHAREHOLDING PATTERN (%) Promoters 56.07 FIs & Local MFs 19.33 FIIs Public & Others 3.42 21.18 Source : BSE Parikshit D Kandpal
[email protected] +91-22-6171-7317 Prabhat Anantharaman
[email protected] +91-22-6171-7319 Raring to grow PNC Infratech (PNC) is a road-focused EPC player with a strong execution track record. It is on the cusp of a new growth phase as ~60% of NHAI’s upcoming bid pipeline is spread across PNC-dominated states, with UP alone contributing 32.6%. PNC’s approach is conservative (selective on BoT bids) and tightly focused on margins and cash flows in the EPC segment of the business. As India enters a cyclical recovery in government-led EPC spends over FY16-18E, we expect PNC’s order book/APAT to grow ~1.6/1.4x. We think PNC’s capital and bid conservativeness will be more visible as the business ramps up. Initiate coverage with BUY. Our SOTP-based TP is Rs 625/sh, valuing the core EPC business at 15x FY18E EPS and BOT portfolio at Rs 130/sh (DCF, implying 1.4x BV). Investment arguments Conservative bids provide margin comfort: PNC ranks high on bidding discretion, with its cumulative NHAI EPC contract award value being 7.2% higher than the benchmark cost vs. even Sadbhav Engg (which is 1.4% lower). This provides comfort on EBIDTA margin guidance of 13-13.5%. The early-completion bonus for the Agra-Lucknow project can add Rs 1bn to FY17E PBT. Cluster-based strategy limits capex: Most of PNC’s projects, including BOTs, are concentrated in UP. Business has remained focused on UP and neighbouring states, thereby ensuring a tight control on execution. This partly explains the high gross asset turn of 4.2x in FY16E. Strong WC cycle, high earnings quality: PNC’s debtor days went down to ~86 in FY15 from ~109 in FY14. With the uptick in the execution cycle, 9mFY16 debtor days further reduced to ~76. This resulted in a cash conversion cycle of 144 days for 9mFY16 vs. 154 days in FY15. The standalone balance sheet is healthy (net D/E 0.03x in FY16E). Robust BOT portfolio: PNC’s 9mFY16 BOT toll collections grew 30% in the Gwalior-Bhind project and 16% YoY in the Kanpur-Ayodhya OMT project. PNC has guided for FY16E toll revenue of Rs 3.53.7bn vs. our estimate of Rs 3.6bn. We value the BOTs at Rs 130/sh (1.4x BV). Near-term outlook: With (1) Strong ordering potential in home location, (2) Ramp-up in BOT traffic, (3) Healthy balance sheet, and (4) Betterthan-peer EBIDTA margins and (5) Expected order inflows; the stock should remain buoyant in the near term. Financial Summary (Standalone) (Rs mn) Net Revenues EBITDA APAT Diluted EPS (Rs) P/E (x) EV/EBIDTA (x) RoE (%) FY15 15,610 2,166 954 24.0 20.7 10.6 14.9 FY16E 19,375 2,595 1,184 23.1 21.5 9.9 12.4 FY17E 22,692 3,014 1,425 27.8 17.9 8.8 11.0 FY18E 26,893 3,583 1,696 33.1 15.0 7.7 11.7 Source : Company, HDFC sec Inst Research HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters PNC INFRATECH: INITIATING COVERAGE Contents Capitalising on robust roads order pipeline ...................................................................................................................... 3 Huge opportunity in PNC dominated states ...................................................................................................................... 4 Conservative bids provide margin comfort ....................................................................................................................... 5 Policy interventions to improve project awards & execution ............................................................................................ 6 Hybrid Annuity Model – Next big driver of PPP projects ................................................................................................... 7 HAM bids show PNC’s conservative stance ......................................................................................................................... 7 Cluster-based execution limits CAPEX outlay ................................................................................................................... 8 WC cycle improves, to stabilise further ............................................................................................................................ 9 Strong competitive positioning ...................................................................................................................................... 10 High earnings quality is the differentiator ......................................................................................................................... 11 Improving client advances to alleviate B/S stress ............................................................................................................. 11 Receivables/networth below industry averages ............................................................................................................... 11 Debtor days lower than industry average ......................................................................................................................... 12 Gross debt/equity lower than peer average ..................................................................................................................... 12 Asset turnover higher than industry averages .................................................................................................................. 13 EBITDA margins higher than peers .................................................................................................................................... 13 Positive OCF ....................................................................................................................................................................... 14 OCF/EBITDA conversion reflect on superior quality cash flow.......................................................................................... 14 Improving employee cost structure .................................................................................................................................. 15 Strong BOT Portfolio – Value BOTs at Rs 130/sh (1.4x P/BV) ........................................................................................... 17 Key assumption & estimates – Standalone ..................................................................................................................... 18 Key assumption & estimates – Consolidated .................................................................................................................. 19 HDFC Sec Vs Consensus ................................................................................................................................................. 20 Outlook and Valuation................................................................................................................................................... 21 Key catalysts ................................................................................................................................................................. 23 Key risks to our BUY stance ............................................................................................................................................ 23 Annexure ...................................................................................................................................................................... 24 Financials ...................................................................................................................................................................... 26 Page | 2 PNC INFRATECH: INITIATING COVERAGE NHAI Project Details Awarded Length (till Feb 2016) (Kms) EPC 2,526 BOT 803 HAM 185 Total 3,514 Upcoming Projects EPC 1,295 BOT 870 HAM 1,236 Total 3,400 Source: NHAI, Company, HDFC sec Inst Research Project Cost (Rs mn) 293,087 107,982 41,620 442,689 182,197 99,365 240,421 521,983 Trend in NHAI project awards EPC (kms) 7,000 BOT(kms) Hybrid Annuity (kms) %EPC - RHS 120 Rs mn 6,000 100 5,000 80 4,000 60 3,000 40 2,000 20 1,000 - FY18E FY17E FY16E YTDFY16 FY15 FY14 FY13 FY12 FY11 FY10 FY09 FY08 FY07 FY06 FY05 (20) FY04 - FY03 The authority plans to award 4,800km in FY16E, of which it has already achieved 2,819km awarded contracts for 3,514km of roads (2,526km under the EPC mode, 803km under BOT and 185km under HAM). – all under the BOT mode. However, project awards declined significantly in FY13 and FY14, plagued by the economic slowdown, subdued infra spending, tight financing environment and weak operating metrics for developers. With a new government at the Centre, the project awarding activity once again picked up pace in FY15. Against a target of 5,000km, NHAI awarded 3,026km, of which 2,292km was under the EPC mode. To attract more private participation, NHAI recently introduced the Hybrid Annuity Model (HAM), which is a mix of EPC and BOT (annuity). NHAI plans to award 4,800km in FY16E —2,900km under EPC, 900km under BOT and 1,000km under HAM. In YTDFY16, the authority has successfully FY02 In order to attract private participation, NHAI has introduced the Hybrid Annuity Model – a mix of EPC and BOT (annuity) models NHAI achieved its peak award of 6,491km in FY12 FY01 Project award activity picked up in FY15 with NHAI meeting 60% of its target, driven majorly by the EPC projects Capitalising on robust roads order pipeline FY00 NHAI achieved its peak award of 6,491km in FY12, but witnessed significant decline during FY13 and FY14 mainly because of macro slowdown Source: NHAI, Company, HDFC sec Inst Research Page | 3 as initiatives like 90% land availability.918 Maharastra 9 EPC 6.134 196 Hybrid Annuity 28.610 135 OMT 2.880 Himachal Pradesh 60 EPC 7.8 Rajasthan 8. if required Huge opportunity in PNC-dominated states PNC has a strong pre-qualification in the highways segment with huge ordering potential.390 Source : NHAI.274 387 Hybrid Annuity 78. the roads segment is a low-hanging fruit for the government. the UP Expressways Industrial Development Authority (UPEIDA) has an order pipeline of ~Rs 250bn.6 Kms Type Project Cost (Rs mn) 70 BOT (Toll) 10. PNC is expected to bid for two packages of Rs 16bn each in the Eastern Dedicated Freight Corridor The existing qualification can be extended to irrigation. water and MRTS segment through JVs.433 16 EPC 3.3 Karnataka 9.050 Jharkhand 151 BOT (Toll) 27. water and irrigation segment. the other key states are Jharkhand.PNC INFRATECH: INITIATING COVERAGE We don’t perceive PNC’s single-segment exposure in roads to be a high risk.407 215 BOT (Toll) 21.2 Bihar 9.0 Jharkhand 9. with ~60% of bids in PNC-dominated states. 10% interest-free advance and setting up of arbitration tribunal have made the sector more lucrative. While roads remain the key focus area. Although investor concerns about roads EPC dominating PNC’s revenue stream are valid. PNC is also qualified to bid for the dedicated freight corridor (DFC).413 UP 145 BOT (Toll) 16. Apart from this.076 Gujarat 208 Hybrid Annuity 30.7 Maharastra 12. With UP alone contributing 32.509 154 BOT (Toll) 20.4 Source : NHAI.687 368 EPC 50. HDFC sec Inst Research UP 32.952 24 Hybrid Annuity 6.6 Himachal Pradesh 7.661 Rajasthan 111 EPC 8. PNC can use its qualification in these segments with JVs.684 West Bengal 127 EPC 17.000km in the pipeline PNC-focused states are also coming up with their own state expressway plans. Company.000km from the existing highway programme and will be adding another 50. Company. the State-wise Distribution Of Upcoming NHAI Bids (%) company’s performance is on a par with other large well-diversified EPC players. There is large ordering potential in MRTS.662 170 EPC 16. Bihar and Rajasthan. HDFC sec Inst Research Page | 4 . It is likely to be the beneficiary of the NHAI’s upcoming bid pipeline.3 Gujarat 7. At present.536 Karnataka 347 EPC 44.055 Bihar 71 Hybrid Annuity 30. The ~60% of upcoming NHAI bidding pipeline is in PNCfocused states NHAI is yet to award 15.030 87 Hybrid Annuity 25. which lend visibility to the next 8-10 years of order pipeline Dedicated freight corridor is another key focus area. with the Lucknow-Ballia Expressway having an ordering potential of Rs 150bn. State-wise Upcoming Project Bid Details Statewise West Bengal 3. The company is currently bidding for two packages of Eastern DFC worth Rs 16bn each.6%. 930 16.Ranjit Buildcon JV Ashoka Buildcon KNR Construction Gayatri Projects Jkumar Infra . despite bidding at 1.392 2.707 14. Its recent NHAI wins are in close geographical proximity. Projects Awarded Under EPC In YTDFY16 Bidder Sadbhav Engineering has bid closer to the NHAI cost and yet given road EPC projects EBIDTA margins guidance of 10-11%. Contractors Pvt.3) (16.1 0.970 14.583 39. The company is at the top of the list with the highest positive difference vs. For the sector.2% higher than the NHAI’s project cost estimates Conservative bids provide margin comfort We mapped YTDFY16 project bids (EPC) opened by PNC’s aggregate win value is 7. too.4% below the NHAI cost on an aggregate basis. the benchmark. Infraprojects Dilip Buildcon .731 205. Additionally. NHAI and aggregated the wins across key EPC players in the roads segment.PNC INFRATECH: INITIATING COVERAGE PNC’s cumulative NHAI EPC project wins value has been 7.2% higher than the This gives us comfort on EBIDTA margins guidance of 13-13.6 4. Better asset utilisation.5%.525 7.885 24.5% guidance.337 6. has guided for 10-11% EBIDTA margins. Hence.589 24. we found that Sadbhav Engineering.7 Source: NHAI. Varaha Infra Total EPC Work Cost (INR mn) 28.470 22.7% higher than the NHAI’s benchmark cost. project cost.4) (5.190 18.233 15.817 % Bidding above/below benchmark cost 7.390 2. the awarded cost is 0. on Pradesh.450 2.5% comparing our coverage universe.645 24.293 206.870 5.2% above the NHAI benchmark cost PNC Infratech G.0 3.809 16. This gives us comfort on EBIDTA margins guidance of 13-13.159 16. HDFC sec Inst Research Page | 5 . is expected to report higher than 10% EBIDTA margins. Ltd.7 0.294 6. as its cumulative award win value is 7.071 5.653 16.3 (0.9) (1. PNC has location advantage in Uttar The aggressive bidding by EPC players of late has cast a shadow on the profitability to be earned on the execution of the projects. Company.870 7.0) 0.0) (11. availability of road aggregates and strong local logistical support will drive cost savings.122 2.061 39.R.G. PNC. However. which provide scope for further margins re-rating.JM Mhatre JV Oriental Infra Sadbhav Engg JP Associates L&T M.2 7.1 4.3) (8.412 Awarded Cost (INR mn) 30. This provides direction on PNC comfortably achieving 1313. will help settle arbitration claims in 18-24 months instead of over a decade at present. Additionally. This. 2015. This often led to projects lying idle for a long time. Policy Decisions Arbitration and Conciliation Act Bill. Toll collection risk lies with the govt. Company. In case of BOT projects. resulting in limited equity funding from the private developers. the developer can exit two years after receiving COD NHAI has introduced onetime fund infusion to revive unfinished BOT projects where significant progress has been made Policy interventions to improve project awards and execution With government initiatives making the roads sector margins more attractive. Earlier. along with the Arbitration and Conciliation Act Bill. The government plans to introduce the Public Utility (Resolution of Disputes) Bill during FY17E. with 90% of the land being acquired before issuing the letter of award to the contractor. 2015. NHAI to only award land after related issues acquiring 80% for BOT & 90% for EPC projects Source: NHAI. and Commercial Courts Bill. Premium rescheduling has also been allowed for projects where developers are witnessing cash flow shortfall in servicing debt. as developer earns annuity-based income Amendments to Model Concession Places onus on NHAI for timely execution. This will provide much-needed relief to stressed developers and also free up equity for new BOT projects. NHAI has introduced one-time fund infusion to revive unfinished BOT projects where significant progress has been made. Unlike in the BOT model. and Commercial Courts Bill. guidelines for renegotiation of PPP concession agreement are expected to be issued. 2015. Regular reporting of projects improves execution and Agreement (MCA) reduces contractual disputes. the developer can exit two years after receiving COD. 2015. After witnessing limited developer interest in BOT projects over the past few years. will help settle arbitration claims in 18-24 months instead of over a decade at present Impact Reduced financial risk for developers as govt. The NDA government’s Union Budget 2016-17 has given a fresh lease of life to PPPs. and a new credit rating system for infrastructure projects will be announced. with 90% of the land being acquired before issuing the letter of award to the contractor In case of BOT projects. bids have been flowing in for the EPC segment. the government will fund 40% of the project cost under HAM. funds 40% of the project cost. Higher EPC order Introduction of Hybrid Annuity Model inflows. Premium payments can be rescheduled and deferred at "bank rate + 2%" to align with project Allowing premium restructuring cash flows One-time fund infusion by NHAI in stuck project will ease funding-related issues and enable debt Revival of stuck projects servicing Allowing developers to exit project two years after receiving COD will provide relief to stressed Easing of exit norms developers Resolving ROW & land acquisition To ease project clearance process and speed up execution. Also. HDFC sec Inst Research Page | 6 . the sector was plagued by the ‘right-of-way’ issue with land availability being a major concern.PNC INFRATECH: INITIATING COVERAGE NHAI has now eased the project clearance process. NHAI has now eased the project clearance process. with fixed costs accruing and resulting in cost overruns. NHAI recently Policy Measures To Improve Executions introduced the Hybrid Annuity Model (HAM) for highways development. 420 61 191 99 7.046 10. Payments will be indexed The annuity payments will be ballooning Original consortium to hold minimum 51% during construction period and till two years post-COD Exit norms Exit allowed post completion of two years of COD Source: NHAI.8% higher Similarly.PNC L3 .20 L2 .246 7.Sadbhav L4 .820 8.280 9. for the Meerut-Bulandshahr.935 Delhi-Meerut Expressway Package-III Project Cost (Rs mn) Length (Kms) Name of Bidder Impact 4-laning of Meerut-Bulandshahr NH-334 L1 .PNC INFRATECH: INITIATING COVERAGE Hybrid Annuity Model: Next big driver of NHAI PPP projects Salient Features Of The Model Key Feature PNC has been conservative while bidding for the initial rounds of Hybrid Annuity projects in UP. Project Name Concession period of 15 years including construction period Bidders will quote construction cost as the bid variable .Ashoka Concessions Enterprise Concessions 15. Delhi-Meerut Expressway Package-I 6.3%.Ashoka L1.called ’Bid Project Cost’ (BPC) Bidding and concession period Bidders to also quote O&M payments Evaluation of bids on lifecycle cost basis considering NPV of both BPC and O&M bids BPC to be indexed every month (70% of WPI and 30% of CPI) 40% of the BPC to be funded by NHAI Payments linked to physical progress milestones (24%.237 22.Ashoka Infratech Infrastructure Concessions 8. with its package-III bid being 46.690 58 7.8% higher.PNC Infrastructure Infratech 12.097 12. 90%) Payments during construction 10% mobilisation advance (interest bearing) to be adjusted against periodic billings Early-completion bonus of 0.790 8.72 L4 . L1 .Sadbhav L3 .855 Source : Company.060 260 40 212 13.060 15. 60%. with its package-III bid being 46. Company. 75%.100 10.730 6.584 Similarly.APCO/ Chetak JV Bid Project Cost 10. for the MeerutBulandshahr.APCO/ Chetak JV 8.804 61. PNC bid was higher than project cost by 28.Welspun L2 . HDFC sec Inst Research 10.415 13. It didn’t bid for the Delhi Meerut Package-I.27 L2 .730 8.576 O&M (Annual) (Rs mn) 171 NPV of Bid Project Cost (Rs mn) 8.636 8. HDFC sec Inst Research HAM bids show PNC’s conservative stance PNC has been conservative while bidding for the initial rounds of Hybrid Annuity projects in UP.5%/month of 60% of BPC 40% of the BPC to be paid in bi-annual annuities over 15 years post-COD Annuities to carry additional interest at 'bank rate +3%' on reducing balance basis Payments during operations Reimbursement for O&M expenses will be as per bids.030 243 162 10. It didn’t bid for the Delhi Meerut Package-I. PNC bid was higher than project cost by 28. 40%.3%.500 Page | 7 . revenue and profitability growth. thereby ensuring a tight control on execution. HDFC sec Inst Research Page | 8 . Existing BOT Projects BULANDSHAHR MEERUT DELHI GHAZIABAD Existing EPC Projects Upcoming Hydrid Annuity Projects ALMORA Purvanchal Expressway (Lucknow to Ballia) BAREILLY ALIGARH AGRA SONAULI BARABANKI FIROZABAD LUCKNOW BHIND KANPUR GWALIOR JARWAL GORAKHPUR AYODHYA SULTANPUR RAE BARELI KABRAI BALLIA KOLIWAR JAUNPUR BHOJPUR VARANASI BUXAR MANIHARI Source: NHAI. which are spread out within a 500-km radius of Delhi. This strategy has resulted in high gross asset turnover of 4. the company has remained focused on UP and the neighbouring states. To assert its dominance in the northern region.PNC INFRATECH: INITIATING COVERAGE Cluster-based execution limits capex outlay PNC’s cluster-based execution strategy fuels its are located in UP.1x FY16E. A majority of its projects. including all the BOTs. Company. The company consciously bids for projects in close proximity to its quarries and crusher plants. 6 40.5 108.03x.0 60.412 (0.492 5.0 90.4 19.0 Net Working Capital Cycle 81.8 75.0 25.5) Source : Company.03x during FY16E Free Cash Flow (FCF) Generation (Standalone) Particulars (Rs mn) EBITDA NWC Changes Cash Flow From Operations Capex Free Cash Flow (FCF) Enterprise Value (EV) FCF/EV (%) FY10 923 (425) 274 (119) 155 17.535 (1.1 110. to stabilise further Inventory days reduced from 52 to 38 days during 9mFY16 vs FY15 Plagued by a prolonged slowdown in economic activity.6 FY14 1.014 (1.600 (0.2 143. 154 as of end FY15.0 160.8 47.9 85.1x end-FY17E vs.0 Other Curr Liabilities & Provisions 18. as net D/E will still be ~0.063 (1.0 90.583 (2.804 (1.166 (1.418 514 1.1 15. HDFC sec Inst Research Page | 9 .5 24.9 71.0 42. the WC may expand resulting in negative FCF. PNC saw its debtor days rise to ~119 in FY12.0 159.0 42.6) FY16E 2.6 41. we don’t expect any significant leverage build up in the balance sheet.0 25.9 13.000) (1. HDFC sec Inst Research Owing to strong revenue growth.2 52.7 76.0 Payables 11.4 33.9 119.376 0.027) 703 (850) (147) 27.073 (1. 0.0 92.0 45.0 42.0 91.094) 632 (1.3 151. This may not have a major impact on balance sheet deterioration.2 25. Working Capital Cycle (Standalone) Cash conversion cycle improved from 154 days end-FY15 to 144 days end9mFY16 Particulars (days) FY10 FY11 FY12 FY13 FY14 FY15 9mFY16 FY16E FY17E FY18E Inventory 20. The FY16E net D/E is expected to be 0.2 22.898 7. 9mFY16 debtors have reduced to 76 days and inventory to 38 vs.5 29.2 45.8 85.593) 342 (800) (458) 25.8) FY17E 3.1 39.179) (19) (339) (358) 22. Given the strong revenue growth. PNC will generate only marginally positive operating cash flows on account of working capital expansion over FY16-18E.118 21. We do not see this impacting the balance sheet materially as the accretion to net worth will keep D/E in check.315) 20. 52 days in FY15.9 34.4 22.9 FY11 1. Despite this deterioration.004 (331) 1.0 38.1 135.8 157.3 42.681) 575 (800) (225) 26.3 5. This has resulted in a cash conversion cycle of 144 Debtor days also improved from 86 days to 76 during 9mFY16 days for 9mFY16 vs.3 20. With the uptick in the execution cycle.288 (2.0 45.1 49. the working capital cycle may marginally deteriorate to 157 days during FY16E.3 91.002) (313) (1. tight financing environment and weak operating metrics.6 154.607 729 2. and may increase to 0. subdued infra spending.012) (380) 23.9) FY18E 3. Capex requirements will result in negative FCF.653 (535) 1.2 42.0 Debtors 65.371 (6. With pickup in the EPC order book and less dependence on captive orders.0 Other Current Assets 25.6) FY13 1.0 91.2 FY15 2.595 (1.1x during FY17E.0 Source: Company.PNC INFRATECH: INITIATING COVERAGE WC cycle improves.5 21.4 160.2 111.673 21.5) FY12 1. Competitive positioning will further strengthen with reducing exposure to subsidiaries and ROE expansion.PNC INFRATECH: INITIATING COVERAGE PNC has strong competitive positioning in the sector Strong competitive positioning On competitive positioning of EPC players. PNC is placed well with above average execution. Relatively Weak Weak Page | 10 . relatively strong cost structure. PNC Ahead Of EPC Peers On Competitive Positioning Cost structure Exposure to Rec/NW Asset Turnover (x) CFO D/E EBITDA Margin (%) Overall Score ITD Cementation J Kumar NCC KNR Construction Simplex Infra Sadbhav Engineering PNC Infra Note: Strong. Source: Company. Relatively Strong. HDFC sec Inst Research Average. Operating leverage on high execution will lead to margin and earning recovery. average CFO/EBIDTA and low D/E ratio. high asset turn. 64 3.83 0.6 12.8 15.46 0.27 0.9 17.3 2.5 11.0 12.3 FY13 12.9 15.23 2.58 FY08 0.89 FY11 1.8 25.3 1.6 2.8 3.23 0. PNC is targeting Rs 104.31 3.1 10.53 0.09 0.55 0.0 18.56 0.1 1.99 0.21 0.8 1. as the impending pick-up in execution cycle will be equally compensated by a proportionate increase in receivables.06 0.4 16.1 12.PNC INFRATECH: INITIATING COVERAGE High earnings quality is the differentiator Improving client advances to alleviate B/S stress Receivables/net worth below industry averages PNC’s advances from customers at ~14. We expect this to remain at current levels in the future.3 12.69 0.84 0.2 17.0 11.6 FY10 1.93 FY16E 0.51 0.20 0.47 FY09 1.8 17.7 6.08 0.1% have remained higher than peer average of 10.78 0.27 3.62 1.0 22.85 0. Client advances/revenue at 14.0 2.71 0.25 0.1 11.8 14.5 14.7 16.4 22.85 0.91 FY13 0.2 FY10 11. This is on account of new order inflows and a majority of the projects being in the early execution stage.4 16.2 27.22 0.8 8.4 FY08 21.49 1.0 16.72 0.5 FY14 18.3 3.3 12.23 2. A higher share of interestfree customer advances will alleviate working capital pressure.8 8.26 1.90 0.23 3.1 6.1% of total In the peer group.12 0.3 FY16E 15.5 14.40 0.4 11.46 0.55 0.6 18.70 0.0 3.5 18.6 FY12 12.13 0. This implies high order book quality and strong collection discipline FY07 ITD Cementation J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average 0.58 0.95 FY15 0.5bn worth of new order inflows between FY16 and FY18E.2 FY15 20.92 0.25 0.66 0.5 FY11 14.54 0.56 0.4 2.4 10.0 13.45 0. PNC’s receivable as percentage revenues in FY16E are higher compared to peer average of 10.6%.43 0.60 0.70 0.1 11.6% of net worth is below the industry average.5 14.98 0.63 0.97 FY14 0.5 20.6 15.8 29.9 7.2 20.6 25.62 0.7 FY09 17.2 3.0 0.46 0.91 0.2 12. Advances From Customers As % Of Total Revenue FY07 ITD Cementation J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average 4.2 14.4 13.1 6.3 3. demonstrating the quality of the order book and financial discipline followed by the company.25 0.8 7.8 18.81 0.95 FY12 0.0 4.23 0.35 0.39 2.4x.61 0.03 0.84 Source: Company *For ITDC FY16E should be read as CY15 Page | 11 .36 0.6 19.9 17.98 0.61 0.53 0.95 0.90 Source: Company *For ITDC FY16E should be read as CY15 Receivables/Net Worth (x) Receivable/net worth is lower than peer group at 0.1 12. 61 1.54 0.69 2.8x.51 1. The management expects this to moderate to 85-90 days by endFY16E.31 0.65 0.93 0.04 0.10 1.32 0.33 0.08 FY14 1. higher operating cash flows and lower capex requirement.1x is lower than its peerset’s average.24 0.57 0.92 FY13 1.09 0.17 2.44 1. We expect this to remain at 0.59 0. This is expected to remain at current levels Gross Debt/Equity (x) FY07 ITD Cementation J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average 1. While we expect an increase.44 1.34 1.80 Source: Company *For ITDC FY16E should be read as CY15 Page | 12 .64 0.09 2.49 0. We expect it to stabilise at 85-90 days over the FY16-18E period Debtor days lower than industry average Gross debt/equity lower than peer average PNC’s debtor cycle is below the peer group PNC’s gross D/E at 0.41 0.61 1.09 0. peer average of 0. Receivables (Days Of Sales) FY07 ITD Cementation J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average 4 74 59 181 64 FY08 114 26 91 45 149 55 FY09 134 33 90 72 130 53 76 80 85 FY10 118 32 99 97 147 81 65 96 FY11 144 39 105 65 178 73 61 101 FY12 81 35 91 45 195 94 119 90 FY13 79 42 73 63 244 159 111 110 FY14 93 41 80 51 271 120 109 109 FY15 94 55 60 73 306 92 86 113 FY16E 40 69 70 68 289 110 85 108 FY10 1. As of Dec-15.97 FY16E 1.07 0.47 0.20 FY15 1.49 0.84 FY11 1.36 1.50 FY08 0.56 0. 86 in FY15.97 0.8x.98 0.71 0.64 0.84 Source: Company *For ITDC FY16E should be read as CY15 Gross D/E lower at 0.49 0.78 0.18 0.25 0.14 1.55 0.81 0.18 2.1x in FY18E primarily on account of ease in net working capital cycle.16 2.51 0.21 1.09 0.25 0.53 FY09 1.25 0.72 0.74 0.08 0.18 0.35 0.92 0. PNC’s debtor days reduced to 76 vs.31 0. average of 0.99 0.90 0.23 0.PNC INFRATECH: INITIATING COVERAGE PNC’s receivable days have improved from 86 in FY15 to 76 in 9mFY16.39 0.90 FY12 1.35 0. it will remain comfortable at ~90 days by FY18E as pick up in the execution cycle will be equally compensated by a proportionate increase in receivables.1x vs.62 0.70 0.45 1.88 0.68 0.96 0. 2 18.7 16.6 5. peers.9 11.3 10.3 3.2 5. enabling it to assert a tight control on timeliness and cost.3 FY11 3.0 3. This is an outcome of choosing quality orders and ahead-of-schedule project completion.9 5.0 2.3 6.9 8.2 11.8 FY12 9.7 FY09 4.3 11.1 9. PNC is expecting nearly ~Rs EBIDTA Margins (%) FY07 ITD Cementation* J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average 14. Expect pick-up on account of increased order visibility and execution capability Asset Turnover (x) ITD Cementation* J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average FY07 2.0 12.2 3.2 10.7 2.0 4.1 FY14 10.9 8.7 4.2 1.PNC INFRATECH: INITIATING COVERAGE Asset turnover higher than industry averages PNC’s asset turnover is higher than the average for its peers.8 10.2 2.9 1.2 6.5 4.2 10.9 FY11 9.8 3.0 10.0 FY16E 6.7 8.3 18.0 6.6 12.3 2.7 Source: Company *For ITDC FY16E should be read as CY15 Page | 13 .4 14.6 2.4 FY08 4.6 Source: Company *For ITDC FY16E should be read as CY15 EBITDA margins higher than peers PNC’s EBITDA margins are ~200bps higher EBIDTA margins higher than peers owing to self-owned equipment and captive quarries near its projects 1bn of early-completion bonus on some of its EPC projects.8 FY09 4.8 5.8 4.3x by FY18E.5 5.4 11. Asset Turnover Higher Vs.3 4.2 18.8 10.6 16.3 5.6 15.0 2.0 3.4 7.1 7.4 10.3 FY16E 5.9 3.7 16.6 6.1 7.1 3.4 11.9 6.4 3.8 13.0 2.6 9.3 6.3 17.0 8.7 2.5 2.1 8.1 1.8 14.2 FY10 9.0 FY13 3.6 3. compared to its peers.4 8.7 3.2 FY08 6.3 5.8 11.2 4.2 3. we expect margins to be maintained in the 13-14% corridor.8 5.3 4.1 2.7 18.0 15.3 11.3 FY14 3.7 3.5 3.5 8.3 11.9 3.2 FY10 4.2 5.8 5.6 15.1 10.5 10.6 3.5 3.3 12.4 2.1 15.6 12. Going forward.8 3.4 1.6 7.8 4.8 FY13 12.1 13.6 2.3 3.1 13.7 8. PNC owns a huge fleet of construction equipment and mines from which aggregates are produced.9 9.7 7.8 12.4 6.8 14.1 11.6 17.3 5.9 4.2 10.1 3.6 FY15 5. mainly on account of increased order visibility and consequent pick-up in PNC’s execution capability.3 1.5 3.2 10.7 10.2 6. We expect the asset turn to improve to ~4.2 4.3 16.6 18.1 FY15 3.3 12. Peers Asset turns higher vs.4 FY12 3.3 11.6 3. 8 (28.7 116.597 702 1.262 1.4 93.2) 80.4 (37.002) (19) 1.051 658 4.5 80.8) 10.699 5.3) 91.126 10 1. PNC will adopt a stable approach while bidding for the EPC segment so as to maintain its EBIDTA margins of 13-14%.164 340 818 1.2 (12.8 7.107 114 341 (1.514) 9.4 101.1 53.956 278 (283) 430 863 (373) 1.5 52.9 FY16E 243 50.2) FY10 34 (0.3 FY13 7 59.9 133.764 3. the quality of cash flows deteriorated during FY16E on account of high working capital investment.0 (17. Operating Cash Flow CFO (Rs mn) FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E - - (2.1 24.9) 47.5 (39.2 12.5 86.7 244.7 26.645 (492) (1.7 61.139 5.869 436 4.651 178 (70) 142 (10) (280) 1.0 62.9 18.5) (51.5) 42.1 193. OCF/EBIDTA Depicts High Cash-Flow Quality OCF/EBIDTA % ITD Cementation J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average FY07 FY08 106.6 FY14 115 (12.3 2.8 (15.3 5.8) 60.8) 118.204 327 439 1. After strong FY13-14 CFO/EBIDTA.7 29.9) (13. This is expected to improve from FY17E.2 (1.9 30. Going ahead. With a currently debtfree balance sheet.7) (77. The trend will improve from FY17E company has been positive.623 (365) 2.222 571 151 1.007 - - - 274 (1.3 0.8 (29.8 FY11 87 (19.685 3.3) FY09 (384) 23.3 30.1 39. which explains the low net D/E ratio. we expect the cash flow from operations to improve as profitability increases and the company exercises a tighter control on its working capital needs.8) 4. Hybrid Annuity opportunity.0 70.9 38.488) 239 (2.5 26.7 FY15 48 23.2 124. PNC has sufficient scope to fund future growth.332 671 2. the OCF/EBIDTA ratio for the OCF/EBIDTA conversion deteriorated in FY15-16E after strong FY13-14 owing to revenue growth pick-up.5 Source : Company *For ITDC FY16E should be read as CY15 Page | 14 .3 111.4 36.504 4.348 ITD Cementation J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average Source : Company *For ITDC FY16E should be read as CY15 OCF/EBIDTA conversion reflect on superior quality of cash flow Barring FY11-12.4 79.6 13.727 1.PNC INFRATECH: INITIATING COVERAGE Positive OCF CFO is expected to remain positive and improve from FY17E PNC has delivered positive cash flows from We expect PNC to benefit from the upcoming operations from FY13.6 78.668 (140) 587 603 1.986 686 7.5 FY12 34 78.3 185.333) 1.653 632 342 402 93 (406) 428 (128) 2.2 33.449) 468 1. while competition in the EPC segment will be huge.7) 63.2) 29.793 1.180 998 (252) 586 1.1 74.2 (9. 6 5.PNC INFRATECH: INITIATING COVERAGE Improving employee cost structure company (roads).6 7.5 3.1 1.6 1.2 8.6 5.0 2.1 FY08 8.8 1.6 Source: Company *For ITDC FY16E should be read as CY15 Page | 15 .9 4.5 1.7 1.9 1.2 3.0 8.6 3.3 FY11 10.8 2.4 4.1 2.9 3.3 8.8 3. with limited skill requirements.0 FY16E 7.4 FY10 8.8 1.6 1.3 FY15 11.3 5.4 3.3 4.2 4. PNC’s employee expense is below its peer average.2 1.3 4.3 4.1 3.4 2.4 2.5 2.5 3.6 3.1 FY13 11.0 4.2 2.7 4.9 FY12 10.4 2.6 5.6 3.6 1.9 FY14 12.7 1.5 2.7 6.6 3.3 5.2 2.5 2.2 8.8 3.1 6.3 1.0 6.8 4.7 5.2 4. Since PNC is virtually a single vertical Employee Expenses % Revenue FY07 ITD Cementation J Kumar NCC KNR Construction Simplex Sadbhav Engineering PNC Infratech Average 1. the cost structure has remained low over an extended period.6 FY09 8.6 2.2 8.5 3.2 5.2 4.5 2.1 3. Book-to-bill Ratio FY10 Expect order book to grow 1.0 FY12 4 Rs mn 16.000 Rs mn FY14 2.6x and revenue CAGR of 17.0 FY18E 25.20 0.45 0.15 0.10 0. Revenues.30 0. HDFC sec Inst Research Net Debt (Rs mn) Expect FY18E net working capital cycle of 160 days and cash flow from operations to improve to Rs 703mn FY15 FY14 FY13 FY12 FY11 Expect FY18E net debt of Rs 2.LHS Net D/E Ratio (x) .500 140 120 1.0 FY14 45.8% over FY16-18E Source : Company.000 20 -1.1x 0 FY10 5.0 FY17E 1 6. over FY16-18E 3 Rs mn FY13 65.RHS Rs mn FY13 3. respectively.000 8.40 0.000 4.0 FY11 EBITDA and PAT margins to remain at 13-13.05 - 3.500 0 FY17E 1.000 160 FY16E 1.1bn and net D/E ratio of 0.RHS FY18E - FY18E FY17E FY16E 2.5%.RHS 14.RHS FY10 Order book (Rs mn) FY15 Order Book.500 180 2.500 FY10 Cash flow from operations .500 FY12 0.500 NWC Cycle .000 100 500 80 0 60 -500 40 -1.000 FY15 2. HDFC sec Inst Research Net Debt And Net D/E Cash Flow From Operations & NWC Cycle Source : Company.000 PAT Margins (%) .5% and 66.PNC INFRATECH: INITIATING COVERAGE EBITDA And PAT Margins (%) Revenues (Rs mn) EBITDA Margins (%) Source : Company.0 Source : Company.35 0. HDFC sec Inst Research FY18E FY17E FY16E FY15 FY14 FY13 FY12 FY11 500 1.000 12.50 0. HDFC sec Inst Research Page | 16 .0 FY16E 2 10.0 FY11 Book-to-bill ratio (x) .25 0.000 2. our estimate of Rs 3.3 19 130 1.3mn PBT during 4QFY16E PNC’s total asset portfolio is valued at Rs 130/sh Strong BOT portfolio – Value BOTs at Rs 130/sh (1. Overloading charges collection can add about Rs 1mn/day in collections. This will take total collection/day to Rs 6-6.5-3. Rs 1. PNC expect to record Rs 97.667 964 1.5mn/day in collection.2 11 0.038 1.5 15 2.4 32 2. PNC has guided for FY16E toll revenue of Rs 3.0 100.5 13.5 13.5 13. the actual 3QFY16 collection stood at Rs 4mn/day.395 350 4.0 35. The management expects to receive three-month partial semi-annuity of Rs 320mn as bonus by Dec-16E.667 964 576 646 789 968 6.5 13.4mn/day estimates. Bareli-Almora: Tolling started during 3QFY16 with Rs 1mn/day collections vs.5mn/day.0 100.0 13.038 1. Further.PNC INFRATECH: INITIATING COVERAGE PNC has guided for Rs 3. We have estimated the same at Rs 3.4 Source: Company. The project achieved COD three months ahead of the June-16E deadline.0 100.4mn/day.717 NPV (PNC Share) INR mn 1.5 13.6bn (PNC share) PNC has monetised 8.53. Against Rs 9mn/day of tolling estimate. Raebareli-Jaunpur Annuity: PNC received COD for the Raebareli-Jaunpur BOT project in March 2016.5mn.0 100. HDFC sec Inst Research Page | 17 . Breakeven interest cost is Rs 5mn/day collections.5mn/day There is no pending equity to be invested in the projects.7bn vs. Kanpur-Ayodhya and Gwalior-Bhind) collections are higher than estimates. Aligarh-Ghaziabad project collection has been sharply lower (Rs 4mn) vs.5 5:25 scheme to align the project cash flows. The PNC JV is also trying to take this project under the Project Bareilly-Almora-Bagheshwar Kanpur-Kabrai Gwalior Bhind Aligarh-Ghaziabad Raibareli . Total equity invested is Rs 4. estimates (Rs 9mn).5% stake in Jaora Nayagaon for a consideration of Rs 341.5 19 1.6bn.629 Project Value (Rs mn) 1. toll collection may improve to Rs 6. The Aligarh-Ghaziabad project has been a pain point in PNC’s BOT portfolio. PNC expects to charge overloading and traffic leakage by Apr-16E.0 100. Post-overloading charge collection and achievement of full COD. PNC Equity Invested (INR mn) 750 675 780 679 1. We have valued PNC’s BOT portfolio at Rs 130/share using DCF methodolgy.4x P/BV) PNC’s 9mFY16 BOT toll collections grew 30% YoY in the Gwalior-Bhind project and 16% YoY in the Kanpur-Ayodhya OMT project.648 Per share Implied P/B value (x) (Rs/sh) 20 1. PNC’s other BOT (Kanpur-Kabrai.6bn. This may result in collections reaching Rs 1.8 13 0.645 646 789 968 7.7bn toll collections for FY16E. full COD (currently tolling is for 103/126km) is expected by May-16E.5 13. The shortfall in the collections is expected to contract post the installation of the Weigh Bridge.Jaunpur Narela Industrial Estate Kanpur-Ayodhya Total PNC Stake (%) WACC (%) 100. which may add another Rs 1. 375 22.7 1.7 1.500) 10bn in 1HCY16E.718 2.682 2.5% FY16-18E net profit to multiply 1.5 1.549 FY15-18E PBT CAGR of 17.1 2.2bn cumulative can be met by internal accruals (797) 509 (288) Net cash position doesn’t change debt materially Source : HDFC sec Inst Research Page | 18 .6 757.0 New order booking Book to bill ratio 18. Total outgo on equity will be Rs 1.6% FY16-18E 441 CAGR 2.490 2.6 Improvement on account of new orders inflow May marginally deteriorate on account of delay in payments for 90 UP Expressway project Higher revenue growth.692 35.2 954 6.7% 6.1 4.429 9.5 86 85 90 632 342 575 CFI .6 2.5% 9.755 55.6 Total Revenue 15.066 (788) 626 791 Closing order book Order book growth (%) FY16-18E revenue CAGR 17.5 2.8 Book-to-bill ratio to improve on new order wins Strong order book accretion to result in FY17-18E with revenue 26.108) 1.PNC INFRATECH: INITIATING COVERAGE We expect 26.0 26.4 525 17.425 6.450) (850) FCF .1 4.a Net cash position doesn’t change debt materially FY18E Comments We expect 26.183 9.5% 13.4x Growth (%) EBIDTA EBIDTA margin (%) Depreciation Financial Charges PBT PBT margin (%) Tax Tax rate (%) APAT Net margin (%) Gross Block Turnover Debtor days CFO .b (1.5 3.6 35.051 2.8 33.583 FY15-18E EBIDTA CAGR of 17.016) 229 (1. EBIDTA CAGR 17.5 660.7 28.3 550 462 319 376 1.4% FY16-18E order backlog CAGR on account of 69.3 4.3 Net margins to remain stable 4.a+b CFF .448 43. robust client advance to result in higher 703 positive cash flow from operations We have assumed PNC to take one hybrid annuity project of Rs (1.184 6.8%.2 27.c Total change in cash a+b+c (1.8 1.734 (275) 1.8% 18.5 34.696 FY16-18E PAT CAGR of 19.2 474.938 strong NHAI and state EPC roads pipeline Strong growth during FY16E as PNC has secured new orders 26.648) (1.610 19.595 13.1 3.4% FY16-18E order backlog CAGR Key Assumptions And Estimates (Standalone) (Rs mn) FY15 FY16E FY17E 34.845 9.1 33.166 13.893 CAGR of 17.9 34.9 worth Rs 28bn 41.3 Margins to remain in 13-13.014 13.114 23.5% range 699 Borrowing cost to grow in line with revenue at 17.9 364 24.5 PBT margins to remain stable 853. 4 0.a Net cash position to remain strong FY18E Comments Toll revenue excludes Aligarh-Ghaziabad.0 1.a+b+c Source : HDFC sec Inst Research (7.8% 33.0 603 925 1.1 20.536 (745) (3.6 2.6 Gross Block Turnover 2.PNC INFRATECH: INITIATING COVERAGE FY16-18E revenue CAGR of 19.501) (2.8% 17.468 1.7 BOT margins to improve as toll projects have close to 90% margins 13.281) 6. Capex to be largely (800) (850) standalone business driven 2.3 5.948.3 6.893 CAGR of 17.261 2.186 toll and annuity projects to reflect from FY17E.5 Impacted by BOT project capitalisation.4 5.353 2. with all the projects being operational. the asset turn is low as revenue is realised over life of the project 75 75 Stable debtor days Higher revenue growth and full impact of high-margin BOTs to result 3.090 2.8) 45.2% 21.392 7.178 1.7% 3.737 7.0 15.609 36.053 Growth in line with BOT assets capitalisation 2.5 479 34.583 FY16-18E EBIDTA CAGR of 17.229 3.786 in higher positive cash flow from operations No incremental BOT project requirement.5% With most of the BOT projects turning profitable from FY18E.249 22.3 2.904.2x Key assumptions and estimates (Consolidated) (Rs mn) FY15 FY16E FY17E Toll revenue 2.277 Interest expense largely driven by BOT projects 2.7% and EPC EBIDTA CAGR of 17.037 23.936 (1.8% FY16-18E EBIDTA CAGR of 32.014 52.5% 53.2 1. Since these are concession 1.4 13.4 8.8 34.c Total change in cash . FY16-18E net profit is expected to multiply 2. PAT Net margin (%) 18.814 471 CFO .2% largely driven by toll EBIDTA CAGR of 56.166 26.a+b CFF .170 1.799.079 Overall FY16-18E revenue CAGR of 19.1% 7.6% 4.9 28.3) 830 3.029 4.343) 3.2 Debtor days 52 60 2.322 FY16-18E Toll EBIDTA CAGR of 56.9 13.8 633 2.650 Net cash position to remain strong Page | 19 .556 Construction revenue 16.662 5.4 (222.5 684 39.940 3.954.4 1.595 36.740 CFI .718 FY15-18E PBT CAGR of 25.1 3.375 22.834 FY16-18E PAT CAGR of 48.692 Total Revenue Growth (%) EBIDTA (Toll) EBIDTA (Construction) EBIDTA margin Toll (%) EBIDTA margin Construction (%) Total EBIDTA EBIDTA margin Depreciation Financial Charges PBT PBT margin (%) Tax Tax rate (%) Minority/Profit from Asso.0 913 4.738 2.394 3.b (9.215 19.1 1.2 (22.256 1.4 17.285) 728 1.1 projects.2 Expansion owing to faster toll revenue growth 811 930 38.4 Overall FY16-18E EBIDTA CAGR of 32. Full year revenue impact of 6.4 23.9 Improvement owing to higher toll revenue 1.8 1.749) (5. FY16-18E CAGR of 30% Expect execution to materially pick up during FY16-18E with revenue 26.4 13.8% This will be driven by toll revenue CAGR of 30% and EPC revenue CAGR of 17.9 3.084) FCF . 614 1.6) (3.9%.603 3.893 2.119 1.2 Source: HDFC sec Inst Research Our consolidated net profit estimate is higher than consensus by 8-12% on account of better toll collection and improvement in blended EBIDTA margins and PAT Consolidated Sales (Rs mn) EBIDTA (Rs mn) Net Profit (Rs mn) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Source: HDFC sec Inst Research Page | 20 .101 3. Lower-thanconsensus topline growth and higher interest outgo will result in our FY18E net profit estimate being lower by 13.249 33.9) Consensus 23. HDFC sec Vs Consensus Standalone This results in our standalone FY18E net profit estimate being 13.692 26.696 (0.PNC INFRATECH: INITIATING COVERAGE Consensus not fully factoring in the impact of back-ended order wins and resultant miss in 20-25% revenue growth guidance Full impact of increased working capital utilisation and higher interest expense not factored in by consensus HDFC sec vs.256 1.1) (1.948 5. Further.2 8.8) (3.9% lower vs.449 29.140 4.3) (2.272 34. Our FY17E and FY18E consolidated revenue estimates are sub-consensus. our estimates are lower vs.276 1. consensus Sales (Rs mn) EBIDTA (Rs mn) Net Profit (Rs mn) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Consensus HDFC Sec % Divergence 19.375 22.7) (3.834 % Divergence (1.2) (11.721 1.037 28.512 23.425 1.7) (13.954 6.3 12. as we model for lower EPC execution.6) (0.2 2. EBIDTA is higher than estimates as we factor in better toll collection and strong portfolio traffic growth. High EBIDTA margin in BOT portfolio will result in higher-than-consensus EBIDTA and PAT estimate.595 3. higher utilisation of working capital (3QFY16-end standalone debt of Rs 450mn is expected to touch Rs 3bn during FY17E) limits will result in increased interest outlay. Consensus On standalone basis.4) 1.005 5.904 830 1.970 19.079 3.905 2.532 27.707 702 1.884 6.014 3.184 1.7) (7.9 18.8) (3.5) (3. Our EBIDTA margin estimate is about ~110bps higher than consensus.695 HDFC Sec 23.583 1. consensus as back-ended orders may result in subconsensus earnings growth. We rate PNC as a BUY with SOTP of Rs 625/sh. We value the BOT business at Rs 130/sh (1. We have valued PNC’s toll projects using 13.696 FCFE Mar-17 Multiple 15 Valuation (INR mn) 25.PNC INFRATECH: INITIATING COVERAGE Outlook And Valuation We value standalone EPC business at Rs 496/sh (15x one-year forward Mar-18E EPS) We value PNC’s BOT portfolio at Rs 130/sh (1. Higher-than-estimated order intake may result in further stock re-rating as PNC has (1) Diversified presence in roads and dedicated freight corridor. (4) 19.7% FY16-18E EPS CAGR and (5) High share of NHAI EPC roads in the order book will result in lower working capital demand.087 Value per Share (INR) 496 130 625 Source: HDFC sec Inst Research Page | 21 . A strong set up in UP will ensure strong order intake for the company.01x.4x of PNC invested equity).6x increase over the FY16-18E period to Rs 69. namely KNR/J Kumar/Sadbhav. (2) Strong execution capability raises hopes of earning early-completion bonus (3-6% of project cost) leading to EBIDTA margin expansion. one of the best in the industry.9bn. While the NHAI pipeline remains strong (about Rs 900bn annually) PNC’s home state Uttar Pradesh is coming up with Rs 250bn of road projects to be awarded over the next 2 years.439 6.5% discount rate for arriving at NPV of the projects. (3) Fully invested BOT portfolio. the collections may remain ~30% below estimates. at 15x one-year forward. We remain cautious on the traffic pick-up in the Aligarh-Ghaziabad BOT project. in line with its road EPC peers. such as KNR Construction and J Kumar Infra Target Price of Rs 625/sh implies ~26. PNC has 76 days of debtor.EPC BOT Value SOTP Value Valuation FY18 Adjusted PAT Methodology FY18 P/E 1.648 32. and (3) Likely support from captive order book in lieu of any contraction in future EPC orders. SOTP Valuation We rate PNC as BUY with SOTP-based target price of Rs 625/sh Segment Standalone construction . (2) Strong balance sheet (9mFY16 standalone net D/E at -0. as these projects have 10% interest-free client advance. the biggest beneficiary of government spending. Our rationale is (1) Robust order book with ~1.4x invested equity) Our target standalone P/E multiple is in line with road EPC peers.1% upside We have valued PNC standalone on P/E basis. We value the (1) Standalone EPC business at Rs 496/share (15x one-year forward Mar-18 EPS) and (2) PNC BOT projects at Rs 130/sh. as current collections are about 50% lower than estimate. Even with overloading and full COD. 9 FY18E 9.2 2.0 6.9 16.0 FY18E 1.9 8.9 2.3 17.8 8.0 18.6 1.7 10.7 10.6 1.7 1.6 7.2 9.2 FY16E 1.4 15.4 13.5 1.6 1.7 FY18E 27.9 7.1 1.1 5.0 18.2 13.PNC INFRATECH: INITIATING COVERAGE Peer Valuations Relative Valuation Ashoka Buildcon KNR Constructions J Kumar Infraprojects NCC Sadbhav Engineering ITD Cementation PNC Infratech Average EV/EBITDA (x) FY16E FY17E 9.9 21.4 8.0 15.6 21.0 17.1 24.8 10.2 10.6 7.2 9.0 2. FY16E implies CY15 Page | 22 .9 20.4 11.3 8.3 P/E (x) FY17E 34.6 2.7 Source: HDFC sec Inst Research for ITD Cementation.7 1.4 21.2 1.4 1.5 25.3 3.2 FY16E 25.4 31.7 7.2 P/BV (x) FY17E 1.8 2.5 2.9 14.8 6.0 5.2 3.7 15.1 2.3 10.8 1.0 9.6 7.1 2.8 33.7 7.3 17.6 1. there is a high probability of PNC exceeding our estimate. with total project cost Rs 140bn. thereby making it eligible for the 6% (Rs 960mn) early-completion bonus. Further. Of the 3. until now.000km). Both states have weak infrastructure. PNC received COD for Raebareli-Jaunpur BOT project on March 8 — three months ahead of June-16E deadline. these projects face cash-flow crunch or delays. limits: PNC’s new order wins are contingent on banks providing non-fund-based limits.000km. The Central government’s support is crucial to take up infrastructure projects in UP and Bihar. Uttar Pradesh will award up to 1. Additionally. but contribute ~22% of Lok Sabha seats. This will make new order wins of Rs 45bn an achievable task. PNC will be the key beneficiary of NHAI’s annual roads ordering of 5. nearly half are in PNC-dominated states.000-6. Strong order pipeline: In terms of the order pipeline. Page | 23 . support growth: PNC expects to complete the Agra-Lucknow Expressway by Dec-16E. Although we have modeled FY17E new order intake at Rs 34bn. which can be as high as 10-20% of the order size. This provides sufficient comfort on order bookings. Localised presence in UP: PNC has ~65-70% of the order book exposed to UP and the rest in Bihar. both states are investing heavily in building infrastructure. This may impact PNC’s execution negatively. is also a lucrative prospect for the company. of which it is currently utilising Rs 11bn.PNC INFRATECH: INITIATING COVERAGE Key catalysts Key risks to our BUY stance Early-completion bonus may ease pressure on Banks’ reluctant to increase non-fund-based B/S.0004. Being politically crucial and with UP going to polls in 2017.400km (Rs 520bn) of roads coming up for bidding over the next 3-6 months. PNC. translating into an opportunity size of Rs 150bn for PNC. Any deterioration in the balance sheet may impact funds tie-ups. the Lucknow-Ballia Expressway. The management expects to receive partial semiannuity of Rs 320mn by Dec-16E.000km over FY17-18E (excludes MoRTH order of 3. These two states are seeing strong order traction owing to Central and state high political stakes. Being financially deficit. PNC has Rs 17bn of non-fund-based limits. has not defaulted on payments and enjoys sufficient fund lines. 6 98.Section of NH-33 4 laning of Chutmalpur-Ganeshpur and Roorkee to Gagalheri 4 laning of Gagalheri to Yamunanagar 4 laning of Rampur-Kathgodam Construction of Sahibganj .099 UP/Uttarakhand Jan-16 Jan-16 Jan-16 6 Laning of Aurangabad to Bihar .0 135.221 Dec-15 Upgradation of Kullu-Manali Section NH-21 EPC 37.4 49.6 10.Package II Delhi .7 19.056 Jan-16 4 Laning of Takoli Kullu section of NH-21 Hybrid Annuity 28.8 27.636 13.895 12.714 Uttar Pradesh Uttar Pradesh Bihar/Jharkhand Himachal Pradesh Himachal Pradesh UP/Uttarakhand UP/Uttarakhand Uttar Pradesh Uttar Pradesh Uttarakhand BOT 150.8 145.908 16.687 Jharkhand Jan-16 Jan-16 State Page | 24 .Bulandshahr NH.523 Dec-15 4 Laning of Solan Kaithalighat Section of NH-22 Hybrid Annuity 22.3 9.687 8.433 5.3 22.6 152.2 65.049 Jan-16 4 laning of Ner Chowk – Pandoh Bypass section of NH – 21 Hybrid Annuity 31.382 8.186 Dec-15 Dec-15 Dec-15 BOT BOT EPC 69.0 Project Cost (Rs mn) 6.Package-IV Hybrid Annuity Hybrid Annuity Hybrid Annuity Hybrid Annuity EPC EPC EPC 8.8 9.Package-III 4 laning of Varanasi Gorakhpur.6 60.9 10.765 10.Jharkhand Border NH-2 6 Laning of Bihar.3 61.PNC INFRATECH: INITIATING COVERAGE ANNEXURE Upcoming Projects in Northern States of India NHAI projects to be awarded in FY16 Last Date of Bid Submission Dec-15 Dec-15 Dec-15 Dec-15 Dec-15 Dec-15 Dec-15 Project Details Type of Project Length (Kms) Delhi .237 6.0 71.Jharkhand Border (Chordaha) to Barwa Adda NH-2 EPC EPC BOT OMT Hybrid Annuity 71.334 4 laning of Varanasi Gorakhpur.9 5.4 21.Manihari Bypass Delhi/UP Delhi/UP Delhi/UP Uttar Pradesh Uttar Pradesh Uttar Pradesh Uttar Pradesh Himachal Pradesh Himachal Pradesh Bihar Jharkhand Jharkhand Hybrid Annuity Hybrid Annuity Hybrid Annuity 51.2 72.159 19.233 Hybrid Annuity 53.7 4.Meerut Expressway .Meerut Expressway .5 43.566 10.804 8.Package III 4 laning of Meerut .Jharkhand Border Section NH-2 4 Laning of Mahulia-Baharagora.593 Jan-16 Jan-16 Jan-16 Jan-16 Jan-16 4 laning of Haridwar-Nagina 4 laning of Nagina-Kashipur 6 laning of Chakeri Allahabad O&M of Jhansi-Orai 4 laning of Rampur-Kathgodam NH-87 6 Laning of Bihar.Package I Delhi .3 2.094 6.3 8.055 27.Package-II 4 laning of Varanasi Gorakhpur.Meerut Expressway .610 2. Construction of Flyover/Underpass at Signature Tower Delhi Gurgaon Access Controlled Highway on NH-8.580 Jharkhand 320.523 3.989 State Uttar Pradesh Bihar 4. 6 Laning of Chakeri Allahabad 4 Laning of Varanasi Gorakhpur.3 16.0 Project Cost (Rs mn) 16.4 49.052 Source: NHAI.PNC INFRATECH: INITIATING COVERAGE Last Date of Bid Submission Feb-16 Feb-16 Feb-16 Feb-16 Feb-16 Feb-16 Feb-16 Mar-16 Mar-16 Mar-16 Mar-16 Mar-16 Project Details Type of Project Length (Kms) 4 laning of Lucknow Sultanpur 4laning of NH-131A Narenpur to Purnea (Package-II).5 12.677 Punjab BOT EPC EPC Hybrid 2 Laning with formation for 4 lane of Shimla Bypass NH – 22 Annuity Hybrid 4-lane Laddowal Bypass Linking NH-95 with NH-1 Annuity 4 Lane Elevated Highway between Samrala Chowk to Hybrid Ludhiana Municipal Limit of NH-95 Annuity 2/4 Laning of Govindpur (Rajgunj).610 8.238 UP UP Jharkhand Himachal Pradesh 17. Construction of Flyover/Underpass at Rajiv Chowk on Delhi Gurgaon Access Controlled Highway on NH-8.702 Punjab 13.0 41.343 Haryana 145.Chas-NH-32 EPC 56.237 27.619 11.9 1.607 EPC - 2. Construction of Flyover/Underpass at IFFCO Chowk on Delhi Gurgoan access controlled highway NH-8. Company.0 8.Package-III 4 Laning of Barhi-Hazaribagh NH-33 Hybrid Annuity Hybrid Annuity 127.0 60. HDFC sec Inst Research Page | 25 .0 3.150 Haryana EPC - 2.851 Haryana EPC - 2. 003 3.145 2.597 3.745 700 1.3 23.798 5.105 70 4.842 3.503 2.465 39 1.010 1.193 2.839 2.785 10.493 4 2.054 1.227 43 1.05 19.493 1.9) 462 1.567 1.786 7.4 441 2.990 2.586 3.6) 3.225 3.103 3.561 Source: Company.593 4 2.478 2.781 892 9.8 525 2.641 16.521 (11.511 19.776 1.4 27.585 8.166 13.095 4.512 19.0 Year ending March (Rs mn) SOURCES OF FUNDS Share Capital .528 16 3.510 5.3 (11.170 16.014 13.885 7.4 19.814 577 5.512 4.290 553 2.829 838 12.692 17.732 36 1.98 45.127 21.611 4.9 699 2.418 12.081 1.666 390 803 1.9) 16.038 390 2.595 5.333 2.229 3.893 18.78 20.717 737 6.145 513 15.218 2.Equity Reserves Total Shareholders’ Funds Long Term Debt Short Term Debt Total Debt Net Deferred Taxes Long Term Provisions & Others TOTAL SOURCES OF FUNDS APPLICATION OF FUNDS Net Block CWIP Investments Total Non-current Assets Inventories Debtors Other Current Assets Cash & Equivalents Total Current Assets Creditors Other Current Liabilities & Provns Total Current Liabilities Net Current Assets TOTAL APPLICATION OF FUNDS FY14 FY15 FY16E FY17E FY18E 398 5.3 18. HDFC sec Inst Research Page | 26 .042 341 701 44 657 (14.1 6.08 (3.263 212 9.7) 248 1.261 1.170 FY15 15.064 1.071 10.696 19.425 20.51 (14.633 2.184 528 3.937 13.554 2. HDFC sec Inst Research Balance Sheet (Standalone) FY14 11.7 364 1.775 10.464 FY18E 26.410 2.888 661 1.316 6.478 475 1.9 52.747 27 1.165 11.153 12.378 70 4.610 35.561 1.070 FY17E 22.655 1.193 4 2.223 758 1.341 18.434 3.367 1.935 7.530 4 2.677 390 3.389 4.218 513 12.231 12.436 2.803 FY16E 19.387 21.631 6.883 106 138 136 135 143 234 1.808 13.048 3.1 8.7) 376 2.960 5.PNC INFRATECH: INITIATING COVERAGE Income Statement (Standalone) Year ending March (Rs mn) Net Revenues Growth (%) Material Expenses Employee Expenses Other Operating Expenses EBITDA EBITDA Margin (%) EBITDA Growth (%) Depreciation EBIT Other Income (Including EO Items) Interest PBT Tax (Incl Deferred) RPAT EO (Loss) / Profit (Net Of Tax) APAT APAT Growth (%) Adjusted EPS (Rs) EPS Growth (%) Source: Company.3 319 1.262 999 7.3 16.397 9.106 2.168 2.585 853 1.677 1.1 550 2.203 2.839 398 6.184 24.004 49 954 45.583 13.559 6.712 1.595 13.0 33.628 70 4.235 6.5 5.499 13.5 9.629 15.892 6.375 24.1 23.779 70 5.503 513 13.164 15.525 14.667 3. 6 154.9 27.0 90.0 12.0 157.629 FY18E 2.027) (853) 703 (850) (147) (650) (1.0 85.0 34.3 Source: Company.2 1.3 5.3 12.0 13.6 30.653 632 342 (535) (1.1 11.0 6.3 1.7 13.0 2.2 (0.7 22.1 1.0 4.6 1.7 2.338) (234) (462) (183) 1.9) 3.6) (0.1 47.0 1.0 24. HDFC sec Inst Research Page | 27 .0 92.5 23.5 (0.2 45.0 22.9 0.0 32.2 45.7) 0.4 13.1 4.478 1.1 52.9 14.8 76.648) (1.9 9.9 12.9 6.0 9.4 14.3 45.4 11.0 90.5 0.3 25.0 0.094) (1.9 151.0 85.1 3.5 16.8 0.095 (58) (2.0 65.6 33.6 1.2 1.0 11.5 273.347 (93) (93) (23) 229 1.585 298 699 (2.1 20.012) (800) 1.0 0.6 33.7 13.9 0.042 1.8 8.5 23.6 64.0 42.5 305.1 15.450) 211 784 (2.0 160.593) (331) (498) (661) 1.5 0.9 180.7 13.2 39. HDFC sec Inst Research FY17E 2.5 9.2 108.978) 4.0 32.118 (380) (458) (478) (636) (650) (1.1 6.7 10.5 246.341 Year ending March PROFITABILITY (%) GPM EBITDA Margin APAT Margin RoE RoIC (or Core RoCE) RoCE EFFICIENCY Tax Rate (%) Fixed Asset Turnover (x) Inventory (days) Debtors (days) Other Current Assets (days) Payables (days) Other Current Liab & Provns (days) Cash Conversion Cycle (days) Debt/EBITDA (x) Net D/E (x) Interest Coverage (x) PER SHARE DATA (Rs) EPS CEPS Dividend Book Value VALUATION P/E (x) P/BV (x) EV/EBITDA (x) EV/Revenues (x) OCF/EV (%) FCF/EV (%) FCFE/Mkt Cap (%) Dividend Yield (%) FY14 FY15 FY16E FY17E FY18E 66.3 6.3) 0.400 (241) 934 0 (93) 1.734 617 (788) 626 999 212 838 Source: Company.4 21.0 91.6 63.9 1.1 4.3 17.3 15.8 39.8 1.6 7.7 5.7 0.1 34.2 2.0 1.0 91.223 241 550 (1.0 25.0 0.7 64.7 4.9 35.3 6.3 (1.7 (1.681) (758) 575 (800) (225) (50) (850) 1.5) 1.5 3.2 10.4 1.7 1.8 71.0 42.4 8.5 11.8 0.PNC INFRATECH: INITIATING COVERAGE Cash Flow (Standalone) Year ending March (Rs mn) Reported PBT Non-operating & EO items Interest expenses Depreciation Working Capital Change Tax Paid OPERATING CASH FLOW ( a ) Capex Free cash flow (FCF) Investments INVESTING CASH FLOW ( b ) Debt Issuance/(Repaid) Interest Expenses FCFE Share Capital Issuance Dividend FINANCING CASH FLOW ( c ) NET CASH FLOW (a+b+c) Closing Cash & Equivalents Key Ratios (Standalone) FY14 FY15 FY16E 1.9 1.4 12.013) (1.500) 900 (298) 455 0 (93) 509 (288) 1.0 4.2 5.888 8 9 172 373 183 248 364 525 514 (1.9 7.5 34.0 25.3 1.066 791 1.3 6.4 6.1 6.6 0.3 34.0 42.8) (11.8 158.3 1.5 2.0 33.7 12.5 2.0 159. 079 17.392 479 913 (0) 913 80.249 22.823 2.587 28.94 65.279 (23) 1.742 5.466 1.62 51.607 1.513 1 16.770 FY17E 28.071 10.232 510 13.593 2.9 35.593 18.797 4.600 4.27 (29.526 24.3 22.948 17.711 1 13.376 2.5 603 2.927 37.066 3.626 1.738 4.052 (222) 830 15.053 4.277 2.9 12.816 37.926 1.586 6.097 1 7.788 45 1.943 18.485 10 3.874 15.601 882 11.196 FY16E 23.3 402 1.9 16.485 6.1 12.358 1.193 17.764 4.431 2.1 1.917 2.8 1.598 39.178 2.754 12.475 4.394 8.106 3.158 3.609 36.3 2.174 814 8.232 25.491 70 715 26.201 1.261 2.393 10 4.709 1 15.170 1.225 2.1) 2.904 20.740 875 922 1.485 Source: Company.718 930 1.8 6.276 2.978 1.090 811 1.976 2.397 3. HDFC sec Inst Research Year ending March (Rs mn) SOURCES OF FUNDS Share Capital .315 2.216 FY18E 33.639 28.309 619 6.8 9.019 3.101 411 8.822 938 22. HDFC sec Inst Research Page | 28 .409 398 8.003 13.030 18.800 10 3.199 14.351 70 738 24.0 2.409 6.501 3.699 7.483 1 14.526 510 14.899 4.601 1.859 16.313 8.5 1.048 1.231 12.95 46.824 6.PNC INFRATECH: INITIATING COVERAGE Income Statement (Consolidated) Year ending March (Rs mn) Net Revenues Growth (%) Material Expenses Employee Expenses Other Operating Expenses EBITDA EBITDA Margin (%) EBITDA Growth (%) Depreciation EBIT Other Income (Including EO Items) Interest PBT Tax (Incl Deferred) RPAT Minority Interest Profit/Loss from Associates APAT APAT Growth (%) Adjusted EPS (Rs) EPS Growth (%) Balance Sheet (Consolidated) FY14 13.1 41.86 (26.973 16.051 13.893 2.852 108 121 136 135 143 609 852 346 506 45 552 (32.5 24.353 FY15 18.202 34.250 31 1.687 2.770 5.0 Source: Company.327 39.833 14.619 1.799 15.256 21.597 5.610 15.131 23.493 18.260 20.553 70 692 25.381 1.489 5.924 10 2.131 510 15.037 23.111 1.615 6.162 11.834 39.0 59.954 21.737 684 1.6 10.998 5.250 34.2 16.2) 13.1 50.1) 925 1.090 892 9.901 3.918 1.644 3.156 6.819 10.644 1.631 2.2 4.Equity Reserves Total Shareholders Funds Minority Interest Long Term Debt Short Term Debt Total Debt Net Deferred Taxes Long Term Provisions & Others TOTAL SOURCES OF FUNDS APPLICATION OF FUNDS Net Block CWIP Investments Total Non-current Assets Inventories Debtors Other Current Assets Cash & Equivalents Total Current Assets Creditors Other Current Liabilities & Provns Total Current Liabilities Net Current Assets TOTAL APPLICATION OF FUNDS FY14 FY15 FY16E FY17E FY18E 398 6. 8 2.4 2.7 4.9 34.1 2.1 0.9 11.6 72.1 4.2 20.1 51.7 66.8 1.9 75.2 21.0 133.134) 583 (766) (3.2 5.6 2.9) (13.4 2.029 4.6 20.8 178.170 1.5 17.1 13.189) (811) (930) 1.9 60.285) 420 (745) 471 728 1.8 16.3 22.7 1.8 32.2 Source: Company.5 5.6 72.6 9.749) (5.1 1. HDFC sec Inst Research Page | 29 .936 (128) 114 (5.9 5.0 1.114) (1.0 8.710 4.1 35.3 2.4 35.090 2.8 (14.6 59.6 51.3 23.4 21.229 3.053 (2.1 (7.4 11.5 7.5 70.1 43.3 13.5 9.8 38.156 411 882 1.2 13.7 7.8 0.3 2.277 1.3 1.1 7.7 28.2 11.419) (9.084) (800) (850) (4.9 2.3 71.468 1.7 1.260 Source: Company.3 12.0 323.1 39.0 131.9 21.9 3.0 218.2 30.4 38.738 2.8 1.0 288.4 7.7 101.8 5.786 (5.0 59.7 0.9 3.9 38.547) (9.8 1.4) (3.0 102.7 21. HDFC sec Inst Research Year ending March PROFITABILITY (%) GPM EBITDA Margin APAT Margin RoE RoIC (or Core RoCE) RoCE EFFICIENCY Tax Rate (%) Fixed Asset Turnover (x) Inventory (days) Debtors (days) Other Current Assets (days) Payables (days) Other Current Liab & Provns (days) Cash Conversion Cycle (days) Debt/EBITDA (x) Net D/E (x) Interest Coverage (x) PER SHARE DATA (Rs) EPS CEPS Dividend Book Value VALUATION P/E (x) P/BV (x) EV/EBITDA (x) EV/Revenues (x) OCF/EV (%) FCF/EV (%) FCFE/Mkt Cap (%) Dividend Yield (%) FY14 FY15 FY16E FY17E FY18E 68.157 7.8 15.718 (135) (143) 2.084) (800) (850) 5.484 876 685 (92) (542) (855) (1.0 5.4 39.6 5.8 0.6 62.8 32.4 0.0 0.3 3.6 6.5 5.9 75.9 2.1 1.1 4.0 4.0 116.1 1.343) 2.9 1.7 7.032 (35) (93) (60) (60) (60) 4.536 3.524) (684) FY17E FY18E 2.388 2.0 264.1 1.178 (1.5 1.9 24.650 1.392 (60) 925 603 107 (500) FY16E 1.1 1.4 62.814 (1.8 (20.862) (5.394) (3.610 3.6 1.032) (7.1 1.501) 788 1.9 10.8 32.6 40.8 21.9 22.4 6.PNC INFRATECH: INITIATING COVERAGE Cash Flow (Consolidated) Year ending March (Rs mn) Reported PBT Non-operating & EO items Interest expenses Depreciation Working Capital Change Tax Paid Profit loss from Associates OPERATING CASH FLOW ( a ) Capex Free cash flow (FCF) Investments INVESTING CASH FLOW ( b ) Debt Issuance/(Repaid) Interest Expenses FCFE Share Capital Issuance Dividend FINANCING CASH FLOW ( c ) NET CASH FLOW (a+b+c) Closing Cash & Equivalents Key Ratios (Consolidated) FY14 852 (58) 609 402 (84) (333) FY15 1.8 32.8 4.5 1.4 21.8) 0.2 1.7 6.261 2.501) (2.9) 0.580 6.0 1.737 (136) 1.9 6.5 9.1 4.127) (2.3 43.0) 3.2 34.5 60.740 3.034) (2.7 5.7 74.1 5.8 16.0 38.5 24.8 9. PNC INFRATECH: INITIATING COVERAGE RECOMMENDATION HISTORY PNC Infratech Date 30-Mar-16 TP 650 CMP 496 Reco BUY Target 625 600 550 500 450 400 350 Mar-16 Feb-16 Jan-16 Dec-15 Nov-15 Oct-15 Sep-15 Aug-15 Jul-15 Jun-15 May-15 300 Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period 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 Page | 30 . wherever mentioned. state. its directors. which could have an adverse effect on their value or price. If this report is inadvertently send or has reached any individual in such country. hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. and Prabhat Anantharaman. express or implied. 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