Buy NCC, target of Rs 45: Angel Broking

Angel Broking is bullish on Nagarjuna Construction Company (NCC) and has recommended buy rating on the stock with a target of Rs 45, in its August 9, 2012 research report. The stock is currently trading at a low valuation of 0.4x P/BV FY2014E.

“Nagarjuna Construction Company, starting off as a building/industrial construction company, has emerged as an EPC contractor with a diversified product portfolio. NCC’s presence across all the key infrastructure verticals: 1) roads; 2) buildings; 3) water; 4) irrigation; 5) electrical; 6) power; 7) oil and gas; and 8) metals endows it with a relatively de-risked business model. NCC has also ventured in international geographies such as Oman and UAE, which further diversifies its business.”
 “For 1QFY2013, Nagarjuna Construction Company (NCC)’s performance was significantly above our and consensus estimates. However, the company continued its dismal show at the EBITDAM level. The current outstanding order book of NCC stands at Rs 20,520cr (3.5x FY2013E revenue), with an order inflow of Rs 2,001cr (up 48.3% yoy) for 1QFY2013. We maintain our Buy view on the stock. On the top-line front, NCC reported a jump of 29.0% yoy to Rs 1,472cr, which was higher than our and the street’s expectation of Rs1187cr and Rs 1257cr respectively. This is the second consecutive quarter of robust revenue growth after a lackluster performance for many quarters. The revenue growth was driven by building, power and water divisions. The management has given revenue guidance for FY2013 at 10-15%, which would be primarily driven by captive power project. As per the management, captive power plant contributed Rs 82cr to the revenue for 1QFY2013 and for the full year it is expected to contribute Rs 350cr.”
“For FY2013 the company has given a guidance of 10-15% growth on the revenue front and is hopeful of maintaining the EBITDAM at 8-9%. NCC’s captive power plant is expected to contribute Rs 350cr to FY2013 revenues. Further, by end of FY2013 NCC is looking to reduce its debt to below Rs2000cr level through stake sale in its road BOT and power project. During the quarter the company has also managed to bring its receivable days down to 88 days from 91 days in 4QFY2012. The stock is currently trading at a low valuation of 0.4x P/BV FY2014E; hence we maintain our Buy view on the stock with an SOTP target price of Rs 45,” says Angel Broking research report. Non-Institutions holding more than 90% in Indian cos 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. To read the full report click on the attachment

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