Buy NBCC; target of Rs 538: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com`s research report on National Buildings Construction Corporation “National Building Construction Corporation (NBCC) is one of the largest public sector enterprises (PSEs) in the construction industry. We believe its PMC division (82% of FY14 revenues) is an economic moat for NBCC in which it gets orders largely on a nomination basis, enjoys negative WC & cash rich balance sheet along with a strong order book. We see the next leg of opportunities for NBCC in the PMC division from redevelopment of old government properties. The recent Navratna status also opens up opportunities to be explored with sick PSU land banks. We initiate coverage on NBCC with a BUY recommendation and a target price of Rs 538 [16x FY16 EPS and 0.6x PEG ratio (largely in line with current PEG)].” “We believe the project management consultancy (PMC) division (82% of FY14 revenues) is the economic moat for NBCC in which it gets 70-80% orders on a nomination basis from various ministries given its public work organisation (PWO) status. It also enjoys negative working capital & a cash rich balance sheet and has a strong order book providing visibility. Currently, its order book stands at ~Rs 17,000 crore, 4.2x FY14 revenues. We believe the next leg of opportunities for NBCC lies in redevelopment of old government properties. The government has identified 30 old colonies in the redevelopment space in Delhi. Out of this, eight have only been awarded/under negotiation (NBCC’s potential market share – 62.5%) each aggregating Rs 2000-10,000 crore. NBCC, after successfully executing the New Moti Bagh project and being the only PSU in this segment, is likely to be a key beneficiary from these opportunities.” “Though NBCC has run up sharply in the last six to 12 months, we believe the risk-reward is still favourable. Based on our scenario analysis, NBCC is still trading close to the Bear case scenario (Rs 427/share) and can offer significant upsides from current levels. Hence, we initiate coverage on NBCC with a BUY recommendation and an SOTP based target price of Rs 538/share (implying P/E of 16.0x FY16E & PEG of 0.6x),” says ICICIdirect.com research report.

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