Small cap stock jumps 8% after bagging an order worth ₹ 819 Cr; Brokerage sees an upside of 39%

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Small cap stock jumps 8% after bagging an order worth ₹ 819 Cr; Brokerage sees an upside of 39%
Credit: © Reuters.

Shares of PNC Infratech (NS: PNCI ) Ltd shot up 8.15% on Tuesday’s early trades to reach an intraday high of ₹ 286.70 apiece after the company bagged an order worth ₹ 819 crores. At 11:56 AM, its shares were trading at ₹ 281.95 apiece, up 6.36%.

The construction company has been declared as the lowest bidder (L1 bidder) for a highway project by the Ministry of Road Transport & Highways. This project involves the construction of a 4-lane highway from Singraur Uphar to Baranpur Kadipur lchauli of NH-731A with paved shoulders (i/c Ganga Bridge) in the state of Uttar Pradesh on hybrid annuity mode.

PNC Infratech (formerly PNC Construction Company) is one of the front-ending infrastructure development, construction, and management companies in India. It undertakes infrastructure projects, including highways, bridges, flyovers, power transmission lines and towers, airport runways, industrial area development, and more.

In a research report dated March 10, 2023, brokerage firm Sharekhan retained a buy call on the stock with a target price of ₹ 390.00. This translates to an upside of 38.32% as compared to its current share price of ₹ 281.95 apiece.

Breaking a lull in project wins, PNC had been declared as the L1 bidder for two HAM projects aggregating to ₹ 2004 crores. Sharekhan said that these order wins come at a critical time when there were nil order inflows during 9MFY2023. It is looking at a favourable risk-reward ratio and considers PNC Infratech to be one of the key beneficiaries of a positive sector outlook. It added that a delay in the execution of projects or an inability to sustain OPM remain a critical risk to their call.

The brokerage added that road project awards and construction activities picked up in January 2023 and they expect strong project awards during Q4FY2023 (January to March 2023). It said that receipt of the appointed dates for HAM projects along with expected order wins in the near term would provide healthy revenue growth for FY2024 and FY2025.

With a market capitalization of ₹ 6,801 crores, PNC Infratech is a small-cap company. It has an ideal return on equity of 17.37% but a slightly high debt-to-equity ratio of 1.39. The company’s shares were trading at a price-to-earnings ratio of 8.95, which is lower than the industry average of 10.30, indicating that the stock may be undervalued and its share price might increase in the future.

Written by Simran Bafna

The post Small cap stock jumps 8% after bagging an order worth ₹ 819 Cr; Brokerage sees an upside of 39% appeared first on Trade Brains.

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