Buy NCC; target of Rs 107: Geojit

Geojit's research report on NCC

NCC Ltd (NCC) is one of the largest, well diversified construction companies in India, with a foothold in every segment of the construction sector. NCC’s Q3FY23 revenue grew 23% YoY, backed by its strong order book and robust execution of Jal Jeevan Mission projects. Order book remains robust at 3.6x TTM revenue (incl L1), providing strong revenue visibility in the coming years. EBITDA margin was at 10.5% in Q3FY23 (up 92bps QoQ, down 30bps YoY), supported by easing commodity prices. NCC expects margins to improve by 10 to 20bps in Q4FY23, led by better gross margin. With a strong order book, the company has guided for revenue growth of 30% in FY23, with a margin of 10%. NCC expects order inflow to increase further and has raised the order inflow target to Rs 20,000cr (earlier Rs 16,000cr) for FY23. Given the strong order book, pick up in execution and benign input prices, we increase FY23/FY24/FY25 earnings estimate by 10%/6%/3% respectively.

Outlook

We maintain Buy rating and value the stock at a P/E of 9x on FY25E EPS with a TP of Rs.107.

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