Buy NBCC; target of Rs 571: Geojit

Geojit BNP PARIBAS research report on National Building Construction Corporation

National Building Construction Corporation (NBCC) is one among the few players present in 3 verticals of Project Management Consultancy (PMC), EPC and Real Estate business. Since FY10, the order book grew at 20% CAGR and current Order book of Rs200bn is 5x FY14 Sales. Both execution and margins have been stable over the years. NBCC has won large re-development projects valued at ~Rs195bn of which Rs4.5bn is in the order book. Management also expressed confidence in increasing execution of orders from FY16E. We factor top-line to grow to ~Rs66bn by FY16E, representing growth of 28% CAGR from FY14. A real estate business with huge land bank, large re-development projects on the anvil, healthy financials backed by growth in business and margins makes case for an excellent investment. Given, MCap(Net cash)/Sales is 1.1x (FY14), NBCC’s orders are yet to peak and true valuations are yet to be discovered, we initiate with a BUY rating valuing at 15x P/E.

 At CMP of Rs435, NBCC trades at P/E of 16.5x and 11.4x on FY15E and FY16E earnings. Given, MCap(Net Cash)/Sales (FY14) is 1.1x, order book is yet to peak and true valuations are yet to be discovered, we value the stock at P/E of 15x its FY16E EPS and rate the stock BUY

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