Roads & Highways CMP 104.70   Market Cap.: 2,624.40 Cr

Stock P/E: 9.33  Debt to equity: 0.01    Book Value: ₹ 59.96  

 No stop signs, speed limit 
Nobody's gonna slow me down 
Like a wheel, gonna spin it
Nobody's gonna mess me around 

Highway to Hell 
AC/DC



ECONOMY – SECTOR & The Size of opportunity   

India is on the rise and this monolith has an incredible hunger for infrastructure  especially ROADS &  HIGHWAYS !

The transport sector contributes 6% of the country’s GDP with road transport having around 70% share. More than 60% of freight and 90% of the passenger traffic in the country is handled by roads.

Government Push

Fiscal incentives for the sector

  • 100% FDI through automatic route allowed subject to applicable laws and regulation.
  • Right of way (ROW) for project land made available to concessionaires free from all encumbrances.
  • NHAI/GOI to provide capital grant (Viability Gap Funding/Cash Support) up to 40% of project cost to enhance viability on a case to case basis.
  • 100% tax exemption for 5 years and 30% relief for next 5 years, which may be availed of in 20 years.
  • Duty free import of modern high capacity construction equipment.

Source: http://www.makeinindia.com/sector/roads-and-highways

The Union Budget 2017-18 stepped up the allocation towards roads and highways was stepped up to Rs 64,000 crore from Rs 57,676 crore.

This piece of news from Bloomberg may bring things into perspective :

Highway Construction In India Way Behind Steep Target 

 In an interview to BloombergQuint in January this year, Union Minister of Road Transport and Highways Nitin Gadkari said he aims to build 30 kilometres per day within this financial year, while pointing out that the monsoon season had slowed construction down to an extent. The latest figure translates to 21 kilometres per day.

land acquisition problems  and bad contractors are the biggest contrin=butres to the lack of road constructions in India not mention local political tantrums are another set of headaches

The Company :Image result for pnc infratech

PNC Infratech is in the Road Construction & Contracting opeting in India Since 1999

has Specialist approach on Roads , No de-worsification 😛

It is likely to be the biggest beneficiary of the surge in  order awards in UP and neighboring states with over 85% of NHAI’s current order pipeline in the northern-central states of UP, Bihar, Odisha and Jharkhand.

Super healthy Order book

PNC Infratech Bags Hybrid Annuity Highway Project of Rs. 1434.0 crore

Source : Equity bulls

Strong Presence in North India now expanding in southern region as well

Business Model   : EPC
Govt here bears the entire financial burden and funds the project. Capital is either raised by issuing bonds like NHAI bonds or by taking steps to secure road toll receivables post construction. Note that the fund here is not raised through banks.
Govt now takes care of clearances, acquiring land and estimating the traffic a very huge exercise that had to be done by private parties earlier.

The Numbers :

Free Reserves flowing in , Improving steadily –Reserves have doubled as well the company sits at

Contingent Liabilities (Cash) 1,306.30

this is really good for an infra company as receivables get delayed a lot!   

Low Debt/Equity , Minimal debt levels is improving Margins

Growing Profits , Company has good consistent profit growth of 26.98% over 5 years    !!

Net Profits  2016 – 2013 242.74  100.36 66.94 76.50 78.38

Valuations : 

INDUSTRY P/E  = 26.15     PNC infra-tech P/E = 9.33 CHEAP!

Over the last year Net profits or Earnings have improved 168% but CMP  has only seen a 4% change so currently the stock is extremely under-valued 

May be its because people have general tendency to discard infra stocks :/

 

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