Patel Engineering (PEC) is a well-established construction company in India, specializing in complex civil infrastructure projects such as hydro power plants, tunnels, urban infrastructure, and irrigation. With a strong order book of ₹19,100 crore, which is 4 times its trailing twelve-month revenue, PEC is well-positioned to benefit from the ongoing infrastructure development in the country.
The company has recently experienced an upturn in its order inflow, recording its highest ever annual order inflow of ₹7,800 crore in FY23. This growth is expected to continue, with bidding opportunities of over 30GW in the hydro power sector. PEC has demonstrated a solid revenue growth of 18 per cent CAGR over FY20-23, with a 20 per cent year-on-year increase in revenue for the year-to-date FY24.
Furthermore, PEC has successfully reduced its leverage to 0.6x in 9MFY24, down from about 1x before the pandemic. This reduction was achieved through internal accruals, non-core asset sales, and equity raises over the past four years. The company has also reported positive operating cash flows for the last four years and has a working capital cycle of 100 days, supported by arbitration claims and land assets.
Looking ahead, PEC expects to recover ₹200-300 crore from arbitration awards in the next year and generate ₹200-300 crore from the sale of land over the next two years. These inflows will further strengthen the company’s financial position, reduce leverage, and provide funds for working capital requirements.
In conclusion, Patel Engineering is a promising player in the infrastructure sector, poised for growth and profitability. With a strong order book, steady revenue growth, and prudent financial management, the company is well-positioned to capitalize on the infrastructure boom in India. Investors may consider adding PEC to their portfolios for long-term growth potential.
