Buy NCC; target of Rs 110: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on NCC

NCC’s Q1FY18 results were above our expectation on the topline front while EBITDA margins came in below our estimates Topline grew 5.9% YoY to Rs 2013.7 crore (our estimate: Rs 1916.5 crore) possibly due to strong execution during the quarter EBITDA margin contracted 23 bps YoY to 8.5% (our estimate: 9.0%) due to higher construction expenses (12.4% in Q1FY18 vs. 12.1% in Q1FY17) Bottomline grew 21.2% YoY to Rs 63.4 crore. However, it included an exceptional item of Rs 12.4 crore relating to profit from sale of investments. Adjusting for this, bottomline de-grew 2.5% YoY to Rs 51.0 crore. It was below our expectation of Rs 54.3 crore despite topline beat, mainly on account of lower-than-expected EBITDA margins and lower other income (Rs 20.9 crore in Q1FY18 vs. Rs 28.6 crore in Q1FY17).

Outlook

We like NCC given its better financial leverage compared to its peers, which would allow it to capture strong opportunities in the infrastructure space, going ahead. Consequently, we expect its bottomline to grow at a CAGR of 20.9% CAGR to Rs 329.7 crore in FY17-19E. We maintain our BUY rating on the stock with a target price of Rs 110/share. We value NCC’s domestic construction business at Rs 120/share (7.5x FY19E EV/EBITDA in line with historical average of Simplex Infrastructure that is also a pure EPC player), international construction business at Rs 3/share (0.5x FY19E price to sales) and the real estate business at Rs 17/share (0.8x P/BV).

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