Another healthy quarter! …
About the stock: NCC is one of the leading construction companies with presence across varied verticals such as buildings, roads, water, mining and electrical. Standalone order book is at ₹ 47,625 crore, 2.5x TTM book to bill.
• Well-diversified order backlog, robust execution capabilities, and strong focus on working capital to be key over next few years.
Q1FY25 Performance: NCC reported standalone turnover of ₹ 4,747 crore in Q1 FY25, up 23% YoY led by strong execution and robust order book. EBITDA at ₹439.6 crore was up 15.5% YoY, however EBITDA margins at 9.3% was down 65 bps YoY, given the project mix. PAT was reported at ₹ 200.7 crore, up 23.7% YoY.
Investment Rationale:
• Poised for a healthy execution ahead with strong order book: NCC has standalone order book of ₹ 47,625 crore, 2.5x TTM book to bill. On consolidated basis, order book stood at ₹ 52,626 crore, 2.4x TTM book to bill. We note that apart from overall opportunity, the company also indicated that it expects improved order inflows prospects from AP and Bihar, given the budget allocations. The company has guided for an order booking of about ~₹ 20,000 – 22,000 crore, excluding any order inflows from AP. The topline growth guidance was maintained at ~15% for FY25, albeit accelerated inflows could drive upgrade of the same going ahead, in our view. Given the robust orderbook, we expect healthy revenue CAGR of ~15.5% over FY24-26E to ₹ 24,429 crore.
• Strong earnings growth momentum & higher return ratios ahead: The EBITDA margin guidance is 9.5% -10% amidst the competitive bidding scenario, and with company focussing on revenue growth momentum in FY25 over margins. We bake in EBITDA margins at 9.5%/10.3% in FY25/FY26 vs. 9% in FY24 (~10% on adjusted basis). Healthy topline growth coupled with stable finance cost is likely to drive ~28.6% earnings CAGR over FY24-26E. The strong earnings momentum will translate into improvement in return ratios, with RoE’s likely to expand to 15.6% in FY26 vs. 12.3% in FY24.
Rating and Target Price
• NCC is a key beneficiary of the tailwinds in the buildings, roads, water, mining and electrical segments. Given the strong order book visibility, and improving balance sheet strength, it is poised for a healthy growth ahead.
• We value NCC at ₹ 400, at 18x FY26 P/E, and maintain our BUY rating on the stock
Leave a Reply