Buy NCC; target of Rs 48: HDFC Securities

HDFC Securities' research report on NCC

NCC Ltd. reported better than expected execution during 1QFY21 with revenue at Rs 11.8bn (vs our estimate of Rs 9.7bn). After adjusting for tax credit of Rs 320mn, loss for the quarter stood at Rs 151mn, against our estimated loss of Rs 549mn. With order wins of Rs 26bn during the quarter, the orderbook now stands at Rs 279bn. Management expects capacity utilisation level to reach 80-90% by September end.

Outlook

We maintain BUY on NCC with a target price of Rs 48/sh as (1) core EPC valuation is inexpensive at 5x FY22E EPS and (2) there is improved visibility on net executable orderbook after removal/descoping of AP orders (3.4x book to bill ratio on FY20 revenue). Key risks to our estimates: (1) Deterioration in NWC days and (2) weak real estate monetisation.

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