Buy NCC; target of Rs 114: Unicon Investment

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Buy NCC; target of Rs 114: Unicon Investment

Unicon Investment is bullish on NCC and has recommended buy rating on the stock with a target of Rs 114 in its May 31, 2011 research report.

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Unicon Investment is bullish on NCC and has recommended buy rating on the stock with a target of Rs 114 in its May 31, 2011 research report.

"NCC Ltd. (earlier known as Nagarjuna Constructions Company Ltd.) standalone top-line and operating profit came in line with our estimates (below street estimates) but surprised negatively at PAT level. NCC's standalone revenue at INR 15bn for the quarter under review declined by 4.7% on yearly basis. Operating Profit at INR 1.3bn, however declined sharply, in line with our estimates, by 14% on yearly basis. The operating profit margin, for the quarter under review, declined by 100bps to 9%. Lower operating profit margins were largely attributable to higher sub-contractor bills and labour charges."

"During last quarter (Q3FY11) company had lost revenue to the tune of ~INR 2bn due to adverse weather conditions. Interest expenses, inline with other constructions companies sharply increased to INR 575Mn, +65% YoY. This was led by higher debt service cost and extended working capital cycle caused by delayed payments from clients and delay in clearances. Net profit after tax at INR 357Mn reduced by 32.8% yoy, lower than our and consensus estimates."

"With order intake of INR 6bn during the quarter under review, NCC's current order book now stands at INR 162bn. The current order-book is ~2.7x company's FY11 revenue. NCC expects reasonable growth in its order-book during FY12. Company aims to an EPC order from its own Power project worth INR 40bn, going forward. Moreover, from its recently acquired division of Nelcast Power plant, company expects order worth INR 50bn.  At the CMP, stock trades at ~6.8x its FY13e consolidated EPS and 6.7x its EV/EBITDA for FY13e. Buy for target (reduced) of Rs 114 (9x its FY13e)," says Unicon Investment research report.

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