Shares of construction company NCC jumped over 8 percent on May 16, a day after the company reported robust earnings for the quarter ended March 2024 (Q4FY24).
Brokerages retained bullish calls on the stock and raised target prices as the company continued to show marked improvement in net working capital (NWC) and is expected to reduce its debt further to Rs 500 crore by March 2025.
At 12:23 pm, NCC shares were trading 7.8 percent higher at Rs 271.15 on the National Stock Exchange (NSE). In the last six months, the stock has rallied over 64 percent, outperforming benchmark Nifty 50 which gained 12 percent during this period.
NCC reported a 25 percent on-year rise in consolidated net profit at Rs 239.2 crore for the March quarter, driven by higher execution. The infrastructure firm's revenue jumped 31 percent to Rs 6,484.9 crore, as the company reaped the benefits of its record order wins in 2022-23.
It also received its highest-ever order inflow of about Rs 26,000 crore in 2022-23 on higher outlay by the government under the National Infrastructure Pipeline (NIP).
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NCC's gross debt at the end of Q4FY24 stood at Rs 1,000 crore, down Rs 470 crore QoQ, despite the uptick in execution. Its net working capital cycle improved YoY to 84 days from 118 days at the end of FY23.
According to analysts at JM Financial, NCC has survived adverse business cycles and is showing marked improvement in operations and NWC management. Additionally, part receipt of Vizag deal proceeds with near-term visibility of receipt of remainder proceeds further strengthens balance sheet, it noted.
"Robust backlog provides strong revenue visibility and we upgrade earnings by 9 percent and 3 percent in FY25 and FY26, respectively", the brokerage said.
NCC stock is trading at valuation of 12.5x FY26E EPS. JM Financial values the stock at 15x Mar-26E core EPS (ex of other income) to arrive at a revised price target of Rs 285, up 14 percent from the previous target price, the brokerage said as it maintained a 'buy' rating on the counter.
The brokerage is bullish on NCC, given that it is a well-diversified player in the construction space. "That it has built up capabilities across infrastructure verticals implies a slowdown in one vertical would not affect its overall growth a great deal," it said. Moreover, NCC has a sizeable land bank spread across cities in South India.
Also Read | NCC Q4 net profit rises 25% to Rs 239 crore
Even though NCC has put on hold its development plans due to a soft real estate market, these land holdings are expected to result in significant value accretion as and when the real estate market improves, Nuvama said as it maintained 'buy' rating on the stock with a revised target price of Rs 290, up from Rs 267 earlier.
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