NCC is one of the largest and well-diversified construction companies in India having expertise and experience in every segment of construction sector. However, the new AP government's decisions to review and cancel certain projects initiated by the previous government have hit NCC in terms of order book (down 27%YoY), revenues (down 34%YoY) and extended working capital cycle (due to non-recovery from AP government). Owing to subdued 9M performance, management has lowered its revenue guidance and we have also factored in the same by reducing our revenue estimates by 12.3%/8.5%/8% for FY20E/21E/22E. We believe that with the vast experience and proven execution capabilities, the company can leverage the rising opportunities in buildings, transportation, metros, defense and airports.
OutlookAt CMP, the stock trades at a P/E of 7.7x/6.8x on FY20E/FY21E EPS and is trading at an EV of 5.2x/4.6x FY20E/FY21E EBITDA. We maintain BUY rating on the stock with a revised TP of Rs98 (earlier TP of Rs108).
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