Buy NCC; target of Rs 108: Dolat Capital Market

Dolat Capital Market's research report on NCC

NCC reported revenue and APAT below estimates but EBITDA margins in line. NCC posted 9.4%/ 4.3%/ 36.3% YoY de-growth in Revenue/ EBITDA/ APAT to Rs19.2 bn/ Rs2.4 bn/ Rs703 mn due to muted execution. After adjusting Rs502 mn (Q3FY20), APAT increased 17.0% YoY to Rs703 mn. We broadly maintain our FY21E estimates. We increase our revenue and APAT estimates by 30.9%/ 29.6% and by 79.7%/ 65.1% for FY22E/ FY23E factoring 9MFY21 results and strong YTDFY21 order inflows of Rs186.8 bn (vs. earlier estimate of Rs110 bn for FY21E). NCC is likely to post -10.4%/ 52.9%/ 10.2% revenue growth in FY21E/ FY22E/ FY23E. We factor WC (% of revenue) of 59.6% (FY21E)/ 49.7% (FY22E)/ 49.9% (FY23E) vs. 52.7% (FY20). We also factor minor reduction in debt to Rs18.1 bn (FY21E) from Rs19.1 bn/ Rs19.7 bn (FY20/ 9MFY21) and thereafter rise to Rs22.1 bn (FY22E)/ Rs21.8 bn (FY23E). We expect revenue/ APAT CAGR of 14.7%/ 36.1% over FY20-23E.

Outlook

Considering covid impact is receding and behind us, leading to normalization of labour availability and execution levels, we expect NCC to report healthy revenue and PAT growth from Q4FY21E and the pace of which will increase in FY22E. Considering, strong orderbook and order inflows gaining traction, we maintain Buy with TP of Rs108 (10x FY23E EPS).

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