NCC climbs 8% on hopes of lower debts, assets monetisation

He believes the worst for construction sector is over. "New orders command better margins. We are targetting FY16 EBITDA margins in range of 8.5–8.8 percent," Murthy said.

Meanwhile, brokerage Emkay upgraded the stock to accumulate from hold. According to the brokerage, as first leg of re-rating on account of de-leveraging is over, improvement in working capital and margin expansion will drive the next leg of re-rating. In recent fall, the stock corrected 30 percent post its Q4 earnings.

The report said the management guided for order intake of Rs 10,000 crore of which 60 percent likely to come from buildings and water segment. It also told the brokerage that its current order book does not have slow moving & low margin orders and expects margin expansion of 100 basis points each in FY16E/17E.

Emkay upgraded the earnings per share for FY16E/17E by 4 percent/6 percent due to reduction in debt (Rs 150 crore over the next two years) as well as the bank guarantee cost which offset by the reduction in proceeds to be received from power plant sale in our SOTP valuation.

At 12:31 hours IST, the scrip of NCC was quoting at Rs 80.55, up Rs 5, or 6.62 percent on the Bombay Stock Exchange.

Posted by Sunil Shankar Matkar