agarjuna Construction - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Nagarjuna Construction Company (NCC)'s performance was significantly above our and consensus estimates. However, the company continued its dismal show at the EBITDAM level. The current outstanding order book of NCC stands at Rs.20,520cr (3.5x FY2013E revenue), with an order inflow of Rs.2,001cr (up 48.3% yoy) for 1QFY2013. We maintain our Buy view on the stock.

Robust revenue growth offset by poor margin performance: On the top-line front, NCC reported a jump of 29.0% yoy to Rs.1,472cr, which was higher than our and the street's expectation of Rs.1,187cr and Rs.1,257cr respectively. Revenue growth was driven by building, power and water divisions. On the EBITDAM front, the company's performance was in line with our estimates at 7.9%, a dip of 230bp on a y-o-y basis. The interest cost came in at Rs.93cr, a y-o-y jump of 7.5% but a decline of 5.4% on a sequential basis. At the bottom-line level, NCC reported a y-o-y decline of 28.6% to Rs.17cr, higher than our and consensus estimates owing to a strong performance on the revenue front.

Outlook and valuation: For FY2013 the company has given a guidance of 10-15% growth on the revenue front and is hopeful of maintaining the EBITDAM at 8-9%. NCC's captive power plant is expected to contribute ~Rs.350cr to FY2013 revenues. Further, by end of FY2013 NCC is looking to reduce its debt to below Rs.2,000cr levels through stake sale in its road BOT and power projects. During the quarter the company has also managed to bring its receivable days down to 88 days from 91 days in 4QFY2012. The stock is currently trading at low valuation of 0.4x P/BV FY2014 and, hence, we maintain our Buy view on the stock with a sum-of-the-parts (SOTP) target price of Rs.45.

Source : Equity Bulls

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