NCC: 3QFY13 result expectations - Ambit

(NJCC IN, mcap US$202mn, SELL, TP Rs66)

Analyst: Nitin Bhasin, nitinbhasin@ambitcapital.com, Tel: +91 22 3043 3241

NCC will report its 3QFY13 results today. We expect revenues to increase by only 10% YoY, owing to low order booking in the past 12-18 months and slowdown in the pace of execution of most of the large projects. Whilst we expect EBITDA margin to increase to 8.4% in 3QFY13, we highlight that this is lower than the historical average EBITDA margin of 9.5-10%. Given that the debt:equity ratio as at end-September 2012 was at 1x and the outstanding debt levels are at Rs25bn, we expect interest cost to remain high; we model net interest cost of Rs805mn in 3QFY13 (which is in line with net interest expense of Rs819mn in 2QFY13). Moderate revenue growth and EBITDA margin improvement will lead to PAT of Rs109mn in 3QFY13 (as compared to a net loss of Rs94mn in 3QFY12).

Key factors to watch out for in the conference call after the results will be: (a) order flow momentum across sectors, (b) management commentary on the working capital requirements, and (c) steps taken by the company to lower its debt levels in the standalone business. Whilst our 3QFY13 revenue and EBITDA estimates are 5% and 3% below consensus estimates, respectively, our PAT estimate is 18% below consensus, because we model higher interest expenses as compared to consensus estimates. Adjusted for the embedded value of Rs18/share, the stock is currently trading at a P/E of 5.3x and 4.3x on our FY13 and FY14 earnings estimates of Rs4.4/share and Rs5.5/share for the construction business (India + international business), respectively.

Source : Equity Bulls

Keywords