Hold NCC; target of Rs 40: ICICI Direct

ICICI Direct recommended hold rating on NCC with a target price of Rs 40 in its research report dated November 11, 2020.

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November 12, 2020 / 19:25 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on NCC

NCC reported a decent set of Q2FY21 numbers. Topline declined 11% YoY to Rs 1,541 crore, largely impacted by slower execution amid disruptions caused by Covid-19 pandemic and heavy monsoon. However, various cost measures initiatives drove operating margin performance (to 13.6%, up 16 bps YoY, 381 bps QoQ. Reported PAT of Rs 58.4 crore (down 27% YoY) was better than our estimate led by operating profit beat. We highlight that NCC had booked Rs 44.2 crore in ‘other income’ as profit against sale of land, and made provisions worth Rs 16.5 crore for impairment of investment in Q2FY20. Adjusted for the same, PAT decline was merely 5% YoY.

Outlook

Labour migration and supply chain disruption has largely impacted NCC’s performance during H1FY21. Going ahead, we expect a gradual recovery from H2FY21 with key solace being controlled debt levels. We note that NCC is currently trading at 6.2x FY22E P/E. However, we would turn constructive only when we witness an improvement in working capital. We assign HOLD recommendation with a target price of Rs 40share (4x FY22E EV/EBITDA).

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