Buy NCC; target of Rs 100: YES Securities

YES Securities is bullish on NCC has recommended buy rating on the stock with a target price of Rs 100 in its research report dated November 09, 2022.

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November 13, 2022 / 19:17 IST

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YES Securities' research report on NCC

NCC ltd (NJCC) reported healthy execution with revenues coming in above our and street estimates by 22%/10% owing to ramp in execution across its project sites. However, margins were marginally impacted on account of high raw material prices. With order inflow (OI) of Rs26.7bn in Q2FY23, the order book (OB) stood at Rs400.2bn (3.4x TTM revenue). The collection period has reduced to 95days on account of improvement in debtor collection. Gross debt has increased by ~Rs8bn sequentially led by pickup in execution of projects, however by end of FY23, management expects to reduce the debt level by Rs4‐5bn. Given the robust order book, pick‐up in execution, stable balance sheet, management has given revised its revenue guidance for FY23E of 30% growth (earlier 15‐20%) with EBITDA margins at 10%. We believe with vast experience and proven execution capabilities, the company can leverage rising opportunities in buildings, water infra, transportation, metros, defense and airports as the awarding momentum pickup. With robust 1HFY23 execution and revised management guidance, we have tweaked our FY23E revenue estimates upwards by 12% while keeping FY24E estimates largely unchanged. We have introduced our FY25E estimates with revenue / PAT growth of 8% / 7% YoY owing to healthy order book.

Outlook

We maintain a BUY rating with a SoTP‐based TP of Rs 100, which includes Rs93 for the standalone construction business (based on 10x FY24E EPS of Rs9.2) and Rs6.8 from real estate/other businesses.

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