Angel Broking neutral on NCC

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Angel Broking neutral on NCC

Angel Broking has maintained neutral rating on NCC, in its February 6, 2012 research report.

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Angel Broking has maintained neutral rating on NCC , in its February 6, 2012 research report.

"Nagarjuna Construction Company (NCC) posted a poor set of numbers for 3QFY2012, below our and street expectations. Owing to the company's poor performance in 3QFY2012, we are revising our estimates downwards for FY2012. Further, on account of the recent run-up in the stock price, we recommend Neutral on the stock."

"For 3QFY2012, NCC's top line declined by 5.4% yoy to Rs1,264cr, which was marginally above our expectation of Rs1,215cr (Consensus: Rs1,271cr). On the EBITDAM front, the company's margin stood at shocking 6.1% (10.3%), registering a dip of 350bp yoy and lower than our estimate of 9.5% due to one-time provisioning (~Rs15cr) and cost/time overruns in few projects. Interest cost came in at Rs69.4cr, registering a yoy jump of 58.3% but a decline of 2.2% on a sequential basis. On the bottom-line front, NCC reported loss of Rs9.5cr in 3QFY2012 vs. profit of Rs40.5cr in 3QFY2011, against our estimate of Rs14.0cr (Consensus: Rs26.4cr), manly owing to dismal EBITDAM performance."

"The current outstanding order book of NCC stands at Rs21,990cr (4.3x FY2011 revenue), with order inflow of Rs9,943cr for 9MFY2012, mainly aided by captive power project (Rs5,200cr), which is notably pending FC. Further, management has revised its revenue guidance to Rs5,100cr-5,200cr (our earlier revenue estimates) for FY2012 from Rs5,700cr-5,800cr, which implies a growth rate of 10.3% yoy for 4QFY2012, which we believe is aggressive. Hence, we are factoring in lower revenue numbers for FY2012 (Rs4,946cr). Further, earnings would continue to reel under pressure due to muted execution pace, margin under pressure and high interest cost on the back of elevated debt levels. Hence, we recommend Neutral on the stock with a fair value of Rs58," says Angel Broking research report. 

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To read the full report click on the attachment