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Well diversified player  

Our view

NCC ltd (NJCC) reported healthy execution with revenues coming in above our and street estimates by 9.1%/2.5% owing to ramp in execution across its project sites. However, margins were impacted on account of steep rise in material prices and operating expense. During 4Q, the company has received part consideration (Rs475mn) from NCC Vizag stake sale while balance (Rs1.5bn) is expected to be received in FY23; the proceed of which will be utilized to fulfill the working capital requirement and reduce debt. For FY23, management has given robust revenue guidance 10‐15% growth with EBITDA margins at 10%.

We believe with vast experience and proven execution capabilities, the company can leverage rising opportunities in buildings, water infra, transportation, metros, defense and airports as the awarding momentum pickup. We maintain a BUY rating with a SoTP‐based TP of Rs 99, which includes Rs92 for the standalone construction business (based on 10x FY24E EPS of Rs9.2) and Rs6.8 from real estate/other businesses.

Result Highlights

*For 4QFY22, NCC’s revenues came in at Rs31.3bn (up 20% YoY) (above our & street estimates of Rs28.7bn/ Rs30.4bn) due to better than anticipated execution of its order book.

*EBITDA came in at Rs2.7bn (below YSec Rs3bn) indicating a de‐growth of 7.9% YoY with EBITDA margins softening 255bps YoY to 8.5% (below YSec estimate of 10.3%) attributed to higher material costs & other expenses.

*Exceptional gain of Rs1.3bn on account of stake sale of subsidiary NCC Vizag Urban Infrastructure Ltd

*On bottom‐line front, Adj PAT came in at Rs1.0bn (vs YSec Rs1.1bn) which was supported by higher other income at Rs450mn (YSec Rs334mn)  

*During the quarter, NCC bagged orders worth Rs8bn in Water/irrigation and Building divisions.

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