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Weak earnings; QoQ debt reduction a key positive

NCC reported weak earnings in 4Q25 as adjusted PAT at INR 2.53bn (up 4% YoY) was below JMFe of INR 2.64bn due to lower revenue and margins. Reported PAT at INR 2.14bn includes impairment of INR 386mn in Oman subsidiary. Gross debt reduced sharply from INR 24bn in Dec-24 to INR 14.8bn in Mar-25 (Mar-24: INR 10bn) led by NWC improvement. NCC has a robust bid pipeline of INR 2.55tn spread across verticals. NCC has guided for order inflows of INR 220-250bn for FY26E. Despite robust order backlog and strong bid pipeline, NCC has guided for revenue growth of 10% for FY26E given the uncertain business environment. We believe it is conservative and have factored 13% growth in FY26E. NCC has guided for EBITDA margins of 9-9.25% for FY26E. It has received robust order inflows of INR 329bn on consolidated basis (standalone: INR 296bn) in FY25. Standalone order backlog stands at INR 625bn (3.3x TTM revenues). We have cut FY26/27E EPS by 14%/13% factoring lower revenue/margins and higher interest costs. We expect robust core EPS CAGR of 30% over FY25-27E. Maintain Buy with a revised price target of INR 285 (EPC business valued at 16x FY27E core EPS).

* Earnings missed JMFe due to lower revenue and margins: NCC’s revenue/EBITDA declined by 1%/3% YoY to INR 54bn/INR 4.95bn (JMFe: INR 56bn/INR 5.35bn). EBITDA margins contracted marginally by 20bps YoY to 9.2% (JMFe: 9.5%). Interest costs grew by 13% YoY to INR 1.74bn (JMFe: INR 1.6bn) due to higher average debt levels in 4Q25.

* Bid pipeline robust at INR 2.55tn; guides for order inflows of INR 220-250bn for FY26E: NCC has received robust consolidated order inflows of INR 329bn (standalone: INR 296bn) in FY25. Standalone order backlog stands strong at INR 625bn (3.3x TTM revenues) as of Mar-25. NCC’s bid pipeline stands strong at INR 2.55tn spread across verticals. NCC has guided for order inflows of INR 220-250bn for FY26E.

* Revenue growth guidance of 10% for FY26E appears conservative: NCC has guided for revenue growth of 10% for FY26E despite robust order backlog and strong bid pipeline due to uncertain business environment. We believe that it is conservative and have factored 13% revenue growth for FY26E. NCC has guided for flattish EBITDA margins at 9-9.25% for FY26E. Gross debt reduced sharply from INR 24bn in Dec-24 to INR 14.8bn in Mar-25 (Mar-24: INR 10bn) led by NWC improvement. NCC has guided for capex of INR 7.5bn for FY26E much higher than our earlier estimate of INR 2.8bn as it includes TBM of INR 3bn for the GMLR project. We have cut FY26/27E EPS by 14%/13% factoring in lower revenue/margins and higher interest costs.

* Business on strong footing: NCC has survived adverse business cycles and is showing marked improvement in operations and NWC management. Also, faster recovery of AP receivables and part receipt of Vizag deal proceeds will strengthen the balance sheet. We expect robust core EPS CAGR of 30% over FY25-27E. We have cut FY26/27E EPS by 14%/13% factoring lower revenue/margins and higher interest costs. Stock is currently trading at 16x/13x FY26/27E core EPS. We value NCC at 16x FY27E core EPS (ex of other income) to arrive at a revised SoTP based price target of INR 285. Maintain BUY.

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