Buy NBCC; target of Rs 1250: Karvy

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26 Aug, 2025 12:21

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Karvy Stock Broking's report on National Buildings Construction Corporation (NBCC)We expect revenue and PAT to grow at CAGR of 13.1% and 16% respectively during FY14 to FY17E. RoE and RoCE are expected to expand by about 2% by FY17E as compared to FY15. Government initiatives for development of infrastructure projects to boost Indian economy offer further prospects of increase in the company’s order book and sales. Huge scope of business in GCC countries in association with overseas partners/agencies.Strong order book lays the foundation for future visibility on robust top line: The order book size is expected to stand at Rs.300-350 Bn by the end of this fiscal. Outstanding order book at the end of Q1FY16 is about Rs.260 Bn which gives the visibility on top line growth and profit. Management guides for sales of Rs.60000Mn during FY16E.Public Works Organization (PWO) status augurs well for NBCC: NBCC is explicitly notified as a Public Works Organization (PWO) construction agency to which PSUs and autonomous bodies can award works on nomination basis.Asset light business model with impressive financial track record: NBCC has asset light business model, as it operates in Project Management & Consultancy (PMC) services which contribute 85% of total revenues and more than 65% of the PBT. In FY15, the company enjoys high RoE and RoCE above 22.6% and 35.2% respectively and expect to maintain the same.The company is debt-free and thus has no interest cost. It maintains a current ratio of more than 1.2x which is clear evidence of its robust fundamentals.Valuation and Outlook"Its diversified business model in construction sector is backed by commendable balance sheet with high cash balance and zero debt make it a buy for a time horizon of 9-12 months. At CMP of Rs.938, the stock is trading at 26.8x FY17E EPS and we recommend a “BUY” with a target price of Rs.1250 representing 35.8x FY17E EPS, with an upside potential of 33%. Currently, NBCC is trading at 5.9x of FY17E BV. Historically, the stock has traded between wide range of 1.1x to 9.6x TTM BV. We have assigned a 7.9x FY17E BV of Rs.158.0 per share for a target of Rs. 1250 representing an upside potential of 33%", says Karvy Stock Broking research report.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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