IGI Logo

NCC delivered strong set of results yet again with Revenue and PAT growth of 41% and 42% respectively for 3QFY24. Higher execution in JJM projects and building and electrical division resulted in a substantial 13% beat on our expectations. While order inflow for NCC in 3Q was muted, substantial order accretion in 1HFY24 will help the company to achieve its guidance of Rs260bn order inflow this year. We expect revenue growth momentum to sustain in FY25 despite election related slowdown in order inflows. Balance sheet in terms of debt as well as working capital continues to improve despite superior revenue growth. We believe that diversified EPC players like NCC have further rerating potential given the vast opportunities across multiple infra segments to tap into. We have increased our PAT estimates for FY24/FY25 by 16%/17% to factor in better execution and margins. Our revised TP now stands at Rs240 (Rs182 earlier) based on 13x Sep25 PAT (12x earlier). We maintain our Add rating on the stock.

3QFY24 result highlights

NCC reported revenue/EBITDA/PAT is 13%/8%/8% ahead of our estimates. EBITDA margins at 10.1% are marginally below our estimate. Over 9MFY24, the company has reported 40%/46%/64% growth in revenue/EBITDA/Pat respectively. Given the strong OB, we expect execution momentum to continue over the next 2 years along with improvement in balance sheet.

Order inflow weak in 3Q but closing OB still strong

NCC reported closing OB of Rs574bn in December 2023. Order inflow during 3QFY24 was weak at just Rs7.96bn but given the strong order accretion in the past, we expect revenue growth momentum to sustain in FY25. The company is L1 in projects worth Rs40bn and has received LOA for projct worth Rs12.5bn recently. As a result, it is confident of achieving its order inflow target of Rs260bn in FY24. Major orders include 1) Smart meter projects (advanced metering infrastructure) in Maharashtra and Bihar, 2) Tunnel project in Mumbai (JV with J Kumar) and 3) JJM project in UP.

Maintain ADD with revised TP of Rs240

We are positive on NCC’s strong execution momentum to sustain in medium term. Large sized orders and diversified orderbook, coupled with focus on balance sheet (better collection efficiency and controlled debt) is likely to result in better earnings. The management had earlier given conservative guidance of 20% revenue growth for FY24 despite achieving 38% growth in 1HFY24. Now we expect revenue growth of ~34% for FY24 for the company. We expect marginal improvement in EBITDA margins and revenue CAGR of 12-14% for FY24-FY26. We have upped our target PE multiple from 12x to 13 x as we believe that strong execution in revenue is likely to sustain for NCC and given the sustained better performance on balance sheet, rerating is likely to follow. Our revised TP post estimate revision stands at Rs240 @ 13x Sep25 PAT. we maintain our ADD rating on the stock.

For More Centrum Broking Disclaimer https://www.centrumbroking.com/disclaimer/

SEBI Registration No.:- INZ000205331