Buy NCC; target of Rs 42: Geojit

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Geojit's research report on NCC

Lockdown impacted execution, Q1FY21 revenue declined by 46% YoY. Monsoon & labour availability to cast cloud over execution in the near term. EBITDA margin declined by 238bps YoY to 9.8% due to subdued execution and fixed overhead expenses while sub-contracting & other expenses reduced by more than 50%YoY. Order book remain healthy at Rs.27,916cr (3.9x TTM revenue) supported by strong inflow of Rs.2,592cr and NCC targets an inflow of Rs.10,000cr in FY21. Adj. PAT declined by 79% YoY due to lower volume of turnover and weak margins. We reduce FY21E/22E revenue estimate by 10%/5% respectively due to slow pace in execution.

Outlook

We maintain Buy rating due to strong order book and cheap valuation with a TP of Rs.42, based on a P/E of 10x on FY22E earnings.

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