Buy NCC; target of Rs 83: Prabhudas Lilladher

Prabhudas Lilladher's research report on NCC

NCC reported healthy 4QFY20 results better than our estimates driven by lower than anticipated impact on execution in its key projects, due to nationwide lockdown. Further construction activity gradually resumed towards end of Apr'20 with over ~90% of projects commencing operations (operating at 50-70% capacity). The company received disbursements on time from Central Government Agencies (including NHAI, AIIMS and Airports Authority of India), however some delays were witnessed from State Govt authorities as focus shifted towards welfare and health services. In addition to this, some uncertainties towards labour migration and supply chain stability will be key monitorables in the short run.

Outlook

We believe that with vast experience and proven execution capabilities, the company can leverage rising opportunities in buildings, transportation, metros, defense and airports once scenario normalizes and awarding momentum returns. We expect revenue/PAT to grow by 12%/6% over FY20-22E. At CMP, the stock trades at a P/E of 5.5x/3x on FY21E/FY22E EPS and is trading at an EV of 3.5x/2.6x FY21E/FY22E EBITDA. We maintain BUY rating on the stock with a TP of Rs83.

NCC 01062020

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