Nagarjuna Construction - BUY - TP Rs.107 - Result Update - Kotak

- Company's revenues for Q2FY18 were sharply lower than our estimates due to GST implementation which had delayed the supplies of material. Also lack of clarity on GST exemption on government projects led to delay in billing and payments from clients. Company expects to recover the shortfall in revenues in the coming quarters. Margins were ahead of our estimates. Interest expense continued to decline in line with the debt reduction as well as lower interest rates. Net profit performance was impacted by exceptional loss on sale of land parcel. Order inflow stood healthy at Rs 148 bn during 7MFY18, much ahead of company's guidance of Rs 120 bn for the full year. Negative surprise came from revocation of bank guarantees worth Rs 2.9 bn from a power project client which will now go into arbitration. Healthy order inflows provide good visibility on revenue growth once near term challenges associated with GST implementation get resolved. We revise our estimates to factor in slower growth in FY18 while improved execution in FY19. We maintain BUY with a price target of Rs.107 on FY19 estimates. However, we believe that issues related to revocation of bank guarantee by the client and corresponding arbitration may weigh on the stock performance in the near to medium term.

Shares of NCC Limited was last trading in BSE at Rs.100.45 as compared to the previous close of Rs. 95.75. The total number of shares traded during the day was 851246 in over 3658 trades.

The stock hit an intraday high of Rs. 101.5 and intraday low of 94. The net turnover during the day was Rs. 83843492.

Source : Equity Bulls

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