Ramesh Damani recommended an investment in National Buildings Construction Corporation (NBCC) on the logic that it has shown healthy growth in the recent past. The EBITDA margins are also on the uptick. Also, NBCC has a bebt-free status with a huge cash balance.
PN Vijay put a buy on NBCC for the same reasons. He also pointed out that the valuations at which the stock is quoting (PE of 14 on current earnings) is attractive.
Nomura has now recommended a buy with a target price of Rs 1,049, which implies a 49% upside.
Nomura pointed out that NBCC enjoys negative working capital (and a cash-rich balance sheet) and passes on risks to sub-vendors on back-to-back contracts, thus remaining asset light.
Nomura also pointed out that NBCC’s status as PSU helps it bag orders without much competition and even on a nomination basis. NBCC also has a strong presence in the project management contract (PMC) business with a strong customer base in mostly government organisations that brings in a base order inflow of around USD 800 million per annum.
Nomura emphasized that four large housing colony redevelopment orders worth USD 3-4 billion are in the pipeline, which can potentially add USD 3-4 billion to NBCC’s order backlog. NBCC is also in discussions with various financially distressed PSUs (including Air India) and the Waqf Board (0.6 million acres of landbank) for the development of surplus land, which could be a large multi-billion dollar opportunity. Together with the upcoming 100 Smart Cities opportunity, this could drive strong growth over next several years.