Moneycontrol Be a Pro
Get App
Last Updated : Jul 14, 2016 02:58 PM IST | Source: Moneycontrol.com

NBCC up 5%; Citi initiates with buy, target price of Rs 300

Citi says NBCC already has impressive order-book coverage of around 6.5 times, but the future could be even better through redevelopment of older government quarters in Delhi and other govt-related projects.


Moneycontorl Bureau

NBCC (India) shares bounced back after yesterday's sharp fall due to divestment announced by the government, rising more than 5 percent intraday Thursday. Citi has initiated coverage on the stock with a buy rating and target price of Rs 300 as it feels a combination of competitive advantages has left the state-run construction company with solid financials.


"Not only does govt-owned NBCC have large market opportunities, but it also faces little competition. Few Indian firms enjoy such a unique advantage. NBCC has a special nomination status for govt orders, takes up low-risk, cost-plus contracts and is well-placed for large order flows in future," it reasons.


As a project management consultancy company, it has strong factors that stand out, which are:

Close

After taking five-year averages
-Post-tax return on capital employed (RoCE) is 15 percent
-Return on equity 24 percent
-It has a net cash balance sheet
-It has an order book of around Rs 37,000 crore, up 4.5-fold since FY12 and is 6.4-fold over FY16 revenue
-A dividend payout ratio of around 40 percent.


Citi says NBCC already has impressive order-book coverage of around 6.5 times, but the future could be even better through redevelopment of older government quarters in Delhi and other govt-related projects.


Last week, the company bagged the project of redevelopment of three out of seven General Pool Residential Accommodation (GPRA) colonies. It also received order for development of government office accommodation at Netaji Nagar from the Cabinet.

Meanwhile, the stock fell 11 percent in previous session after the government has decided to divest 15 percent stake in the company. It holds 90 percent stake in the company.

In an interview to CNBC-TV18, the company's Chairman Anoop Kumar Mittal said while actual realisation will be derived based on market valuations, he believes the government can realise more than Rs 1,700 crore through the stake dilution. 

However, he said the company is in no discussion with the government to pare down stake below 75 percent. 

Government has also approved Rs 50,000 crore worth redevelopment projects last week, he said. 


At 09:21 hours IST, the scrip of NBCC (India) was quoting at Rs 238.65, up Rs 8.85, or 3.85 percent on Bombay Stock Exchange.

Posted by Sunil Shankar Matkar



The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .
First Published on Jul 14, 2016 09:36 am
Loading...
Sections
Follow us on
Available On
PCI DSS Compliant