Buy Nagarjuna Construction; target Rs 75: Angel Broking

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Buy Nagarjuna Construction; target Rs 75: Angel Broking

Angel Broking is bullish on Nagarjuna Construction (NCC) and has recommended buy rating on the stock with a target price of Rs 75 in its November 4, 2011 research report.

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Angel Broking is bullish on Nagarjuna Construction (NCC) and has recommended buy rating on the stock with a target price of Rs 75 in its November 4, 2011 research report.

"Nagarjuna Construction (NCC) posted a poor performance for 2QFY2012, below our and street expectations. Owing to the company's poor performance in 1HFY2012 and as no respite is expected from the macro challenges faced by the company in the medium term, we are revising our estimates downwards for FY2012 and FY2013. However, owing to its attractive valuations and diversified order book with exposure to most growth sectors."

"For 2QFY2012, NCC reported a 9.2% yoy decline in its top line to Rs 1,090cr, which was below our/street expectations of Rs 1,261cr/Rs 1,271cr. EBITDA margin for the quarter came in at 9.5%, lower than our estimate of 10.3%. Interest cost during the quarter came in at Rs 70.9cr a yoy/qoq jump of 89.4%/10.9% which above our estimates. The company's bottom line came in at Rs 11.4cr, registering a yoy decline of 75.2%, owing to subdued topline growth and escalating interest costs, and much lower than our/street estimate of Rs 29.8cr/Rs 29.1cr."

"The current outstanding order book of NCC stands at Rs 16,570cr (3.3x FY2011 revenue), with order inflow of Rs 1,746cr for 2QFY2012. Going ahead, we believe the NCC's order inflow would be driven by EPC work of its own power plant. However, earnings would continue to reel under pressure due to a soaring interest costs owing to high interest rate regime and increased debt levels - to fund its investments in the captive projects (read power project/road BOT project) and working capital requirements. At the current price, the stock is trading at attractive valuations (4.4x its FY2013E earnings adjusted for its investments and subsidiaries) and at 0.5x FY2013E on P/BV basis (standalone). Our revised target price of Rs 75 (earlier Rs 82) is arrived on SOTP basis and implies an upside of ~38.0% from current levels hence we maintain Buy on the stock," says Angel Broking research report.

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To read the full report click on the attachment