Add NCC Ltd For Target Rs.195 by InCred Equities
Poised for steady FY26-28F growth
1. Standalone sales & EBITDA rose 32%/ 50% yoy. This is a significant improvement from FY26/ 1QFY27 when EBITDA declined 17% yoy/ rose 12% yoy. Sales from Jal Jeevan Mission projects was was muted in FY26 (Rs17bn). However, NCC received payment payments of Rs10bn in 4QFY26, Rs6bn in 1QFY27 and Rs17bn in 2QFY27 – this, which is encouraging.
2. OB/sales in Mar 25 was 3.7x, like Mar 22/23 when sales rose by 34%/ 39% yoy (FY23/24). Despite strong OB, FY26 sales dipped 9% yoy due to slow execution (23% of OB in FY26) mainly in roads (17% execution; 20% of FY26 OB) and water & railway (19% execution; 12% of FY26 OB). 2QFY27 OB/ sales is 4.2x & even ex projects won in 1H (Rs87bn) where there could be delays in start of execution, OB/ sales is still healthy 3.7x.
3. NCC maintained FY27 guidance of
(a) 10% yoy sales rise – tad lower than 21% yoy rise in 1H
(b) 8.5-9% EBITDA margin (in-line with 1H)
(c) Rs220-250bn order flow. We expect 10% sales CAGR (FY26-28F) driven by the strong OB/ sales (4.2x). Traction in receipt of payments (vs. Rs27bn receivables) in JJM projects is encouraging. JJM comprises 7% of NCC’s OB. This could provide Rs35-40bn sales in FY27F (vs. Rs17bn in FY26), which could alone drive 10% yoy rise in standalone sales. We factor in Rs220bn orders each in FY27F/28F, lower than average in FY24-26 (Rs300bn). We factor in 8.75% EBITDA margin in FY27-28F vs. 8.3% in FY26 & 8.7% in 1H.
4. Maintain ADD | TP Rs195: We factor in a 10% p.a. rise in standalone sales over FY26-28F. We have valued the EPC business at 7x FY28F EV/EBITDA (10% above eight-year median of 6.4x). NCC trades at 6.8x FY28F EV/EBITDA (on a standalone basis).
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