Buy NBCC; target of Rs 280: ICICI Direct

ICICI Direct's research report on NBCC

NBCC has received robust order inflows of Rs 5200 crore in H1FY17 taking its current order book (inclusive of redevelopment projects) to Rs 71,000 crore, providing strong revenue visibility, going forward. Order book consists of 96% from PMC & redevelopment space and 4% from the real estate and EPC division. Going forward, the management has guided for order inflows of Rs 10000 crore in H2FY17. Furthermore, the company is running ahead of schedule in redevelopment of two colonies viz. Nauroji Nagar and Netaji Nagar worth Rs 15000 crore. The management expects revenue recognition from these colonies to begin from Q2FY18. With its strong order book and strong project pipeline, we expect topline, bottom line to grow at a CAGR of 32.6%, 25.1% to Rs 10112.6 crore, Rs 482.7 crore, respectively, in FY16-18E.

The stock is trading at 15xFY18E earnings. We have cut our earnings estimate by 4% for FY17& FY18 to factor in weak execution. The company continues to focus on its strategic plan of achieving profitable growth and improving RoE in medium term. We Maintain ‘BUY’ with TP of Rs 1541 (Previous Rs 1590) given its strong business model, diverse skill sets, strong execution capabilities and relatively healthy/large balance sheet and being the go to go company in the Indian infrastructure space. We expect company to deliver 21% earning CAGR over FY16‐18E. Maintain ‘BUY’.