Company Update: NBCC (India) Ltd - BUY - TP Rs.95 - Kotak

NBCC (India) has been in news in recent time due to award of new contracts, acquisition of PSUs in similar businesses, tree cutting related issues in its redevelopment projects, etc. Below mentioned are the key highlights of the same.

Key highlights

- NBCC is acquiring stake in 2 PSU companies HSCC (India) and EPI with specialized expertise in PMC segment. Based on its past track record of acquisition of Hindustan Steelwork Construction, the company is confident of positive synergy from the acquisition.

- As per media article, Ministry of Housing and Urban Affairs has recently informed the Delhi High Court about revised plan for redevelopment of government colonies under which tree cutting would be minimized. The company is positive on the clearance of the project and would update on the same in future.

- NBCC has received in principle approval from Air India to monetize / redevelopment ~34 acre of Air India's land parcel at prime location in Delhi. We believe that these projects are located at prime location in Delhi and has huge development potential and would positively impact its order book.

- The company is in process of preparing detailed project report for completing real estate projects of Amrapali group. The company would be doing this project on PMC basis and is not required to invest any amount in the same.

- NBCC has strong order book of ~Rs 800 bn which includes Rs 500 bn of self-revenue generating project (Redevelopment project). The present order book gives very strong revenue growth visibility for the next 5 years.

Outlook & Valuation

- The company has maintained guidance of 30% yoy growth in FY19E revenue despite challenges faced by its large size redevelopment project. We maintain our earnings estimates for FY19E and FY20E based on new order inflows and expectation of timely resolution of legal hurdles. The stock is presently trading at PE of 26.8x and 21.3x based on FY19E & FY20E EPS of Rs 2.3 and Rs 2.9 respectively. We maintain Buy on the stock with target price of Rs 95.

Shares of NBCC (India) Ltd was last trading in BSE at Rs.58.5 as compared to the previous close of Rs. 61.75. The total number of shares traded during the day was 588451 in over 3009 trades.

The stock hit an intraday high of Rs. 62.55 and intraday low of 57.65. The net turnover during the day was Rs. 35140289.

Source : Equity Bulls

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