Maintain BUY on NCC - In-line performance - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Chintan Parikh, Institutional Research Analyst, HDFC Securities

NCC reported in-line revenue/EBITDA/APAT at INR 26.2/2.9/1.2bn, (1)/(4.5)/(0.1)% (below)/ahead our estimate. NCC ended FY21 on a strong note with robust order inflows of INR 189bn and order book of INR 379bn (5.2x FY21 revenue). Gross debt reduced by INR 1.2bn YoY to INR 17.9bn. NCC expects debt to further reduce by INR 2bn in FY22E on the back of likely real estate monetisation of INR 3bn and realisation of INR 2.3bn net current exposure in stuck AP projects. We maintain BUY on NCC with target price of INR 114/sh (INR 115/sh earlier), given (1) improved earnings visibility on robust order book; (2) abating AP risk; and (3) stable balance sheet.

In-line financial performance: NCC registered revenue of INR 26.2bn (+20/+36% YoY/QoQ), miss of 1% as COVID-related challenges impacted execution. EBITDA came in at INR 2.9bn (+3.3/+21% YoY/QoQ, 4.5% miss). EBITDA margin contracted 179bps YoY to 11.1% due to commodities inflation, COVID-19 second wave impact and slow-moving AP projects. Consequently, APAT came in at INR 1.2bn (+11%/+63% YoY/QoQ), in line with our estimates. About 65-70% of the order book is covered under cost escalation and smaller cycle orders up to 1.5yrs are fixed price.

Order book ~5.2x FY21 revenue; lending strong growth visibility: NCC secured INR 189bn of orders during FY21. At the end of the FY21, order backlog stood at INR 379bn (5.2x FY21 revenue), of which Buildings/Water & Railways accounted for 56/19% and Roads, Electrical, Irrigation and Mining constituted 5-7% each. AP accounts for only 11% of the order book now. NCC has not given any guidance for FY22 revenue given COVID uncertainty but cited that there is 10% impact vs budgeted execution for 1QFY22. At HSIE, we expect NCC to clock INR 100bn+ revenue for FY22E.

Balance sheet position remains stable with further deleveraging likely: Gross/net debt stood at INR 17.9/13.5bn (-INR 1.2/2.4bn YoY, net D/E at 0.25x at the end of the FY21 and it is expected to come down by INR 2bn in FY22E, basis management commentary. NCC is positive on recovering stuck AP projects dues, which stand at INR 2.3bn. Sembcorp final hearing is expected in Nov-21.

Shares of NCC Limited was last trading in BSE at Rs.78.25 as compared to the previous close of Rs. 80.95. The total number of shares traded during the day was 504621 in over 3448 trades.

The stock hit an intraday high of Rs. 82.65 and intraday low of 77.65. The net turnover during the day was Rs. 40576339.

Source : Equity Bulls

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