Hold NBCC; target of Rs 227: Edelweiss

Edelweiss' research report on NBCC

NBCC management, during our recent interaction, reiterated its focus on execution of its ~INR800bn order book (~13x TTM revenue). The company has tendered out ~INR100bn projects in the past six months and expects to maintain similar run rate going ahead. With ~INR500bn projects in its order book belonging to the ‘self revenue generation’ category, real estate monetisation emerges as the key monitorable since it will determine project award and consequently execution. We expect execution to gather pace in FY19 when work on Pragati Maidan, redevelopment projects in Delhi, among others, gathers steam. Maintain ‘HOLD’ with target price of INR227.

Outlook

Burgeoning opportunities in building construction (Buildings: Dawn of a new era) are triggering significant order accretion for NBCC. However, with bulk of the projects being on ‘self revenue generation’ mode, realty monetisation has emerged as a key factor, which will determine stock performance, in our view. We expect execution to gather pace in FY19 driven by pick up in work on projects awarded over the past six months. We maintain ‘HOLD’ with target price of INR227, based on 38x FY20E EPS.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More