Buy NBCC; target of Rs 1150: ICICI direct

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26 Aug, 2025 12:21

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ICICI direct’s research report on NBCCNBCC’s topline grew 23.5% YoY toRs.1116.6 crore below our estimate of Rs.1133.5 crore. While the PMC division revenues grew 15.3% YoY to Rs.897.7 crore (our expectation:Rs.994.8), real estate and EPC divisions revenues grew strongly at 71.8% YoY and 80.7% YoY toRs. 163 crore andRs.55.9 crore, respectively. The EBITDA margin expanded 34 bps YoY to 5.9% well above our estimate of 4.8% mainly due to higher EBIT margin in the PMC division at 7.5% (our expectation: 6.3%) and the real estate division margin at 28.3% (our expectation: 28.5%). Bottomline grew 11.9% YoY toRs.67.2 crore and was well above our expectation ofRs.48.3 crore mainly due to higher margin in the PMC division and better performance of the real estate and EPC divisionOutlook and ValuationAt the CMP, the stock is trading at 21.7x FY17E P/E and 4.1x FY17E P/BV. Given the healthy order book in the PMC division and cash rich balance sheet, NBCC’s revenues have grown at a CAGR of 10.6% during FY12- FY15 despite the challenges being encountered by the industry. Going ahead, we expect NBCC’s next leg of growth to come from redevelopment of government properties in Delhi. Hence, we anticipate NBCC’s revenues and net profit will grow at a sturdy CAGR of 44% and 41.5%, respectively, during FY15-17E. We also like NBCC due to its cash rich balance sheet and healthy return ratio profile. We have valued NBCC’s PMC business & redevelopment business on the DCF based methodology to capture the long term opportunities in each business. We have considered cost of equity of 12.7% for the PMC business and 14% for the redevelopment space. We have also rolled over our valuation to FY17E and considered a terminal growth rate of 4% for both businesses. Based on these assumptions, we have valued NBCC’s PMC business at Rs. 451/share & re-development opportunities at Rs. 589/share. The real estate business has been valued at Rs. 90/share (at 1x FY16 P/BV) while the EPC business has been valued at | 20.4/share (6x FY17EV/EBIT). Overall, we ascribe a target price of Rs. 1150/share for NBCC based on SOTP methodology.For all recommendations, 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.

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