Dolat Capital is bullish on NCC has recommended buy rating on the stock with a target price of Rs 76 in its research report dated November 05, 2019.
Dolat Capital's research report on NCC
NCC reported lower than expected numbers on all fronts. NCC posted weak set of numbers with 44.2%/ 36.2%/ 82.7% YoY de-growth in Revenue/ EBITDA/ APAT to `17.3 bn/ `2.3 bn/ `300 mn due to lower execution coupled with higher depreciation + interest cost and lower other income. Core EBITDA margins (adjusting for `310 mn claim on Mumbai projects). We sharply reduce our revenue estimates by 21%/ 18.1% for FY20E/ FY21E factoring 28.2% de-growth in 1HFY20, reduced order inflow for FY20E and lower execution rate. NCC is likely to post -20.9%/ 18.7% revenue growth in FY20E/ FY21E. We maintain core EBITDA margin estimates of 11.7%/ 11.7% for FY20E/ FY21E. Accordingly, we reduce our Adj. PAT estimates by 45.1%/ 31.8% for FY20E/ FY21E primarily due to reduction in execution and higher tax rate of 33% vs. 25.6% for FY20E.
We expect recovery in FY21E with 18.7%/ 59.8% growth in revenue/ Adj. PAT. Considering ~50% correction in stock price during YTDFY20 and recovery in FY21E, we maintain BUY with downward TP of `76 (9x FY21E EPS).
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