Buy NCC Ltd For Target Rs.340 By Geojit Financial Services Ltd
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Better prospects for H2FY25....
NCC Ltd (NCC) is one of the largest, well diversified construction companies in India, with a foothold in every segment of the construction sector.
* In Q2FY25, NCC reported a weak revenue growth of 3.8% YoY due to heavy rains, delay in execution in JJM projects and smart meter projects.
* EBITDA margin improved by 252bps YoY to 9%, while NCC expects margins to improve to 9.5 to 10% in FY25.
* The company reiterated its guidance for FY25, including order inflow of Rs 20,000cr to Rs 22,000cr, and a revenue growth of 15%.
* The order inflow has picked up pace in Q2FY25 to Rs4,760cr vs 41cr in Q1FY25 and the order book stood robust at Rs52,370cr which is 2.7x TTM revenue.
* The order book is dominated by building (37%), transportation (21%), electrical T&D (21%). In terms of states, Maharashtra constitute 38% of the order book in Q2FY25, followed by UP 16% and Jharkhand 9%.
Valuation
The execution to pick up pace in H2FY25 due to higher govt. spending and we expect a topline CAGR of 15% over FY24-FY27E with a margin profile of 9.4 to 10%. We expect NCC will get more opportunity from the robust order pipeline of Rs 2 trillion from the government. Therefore, we reiterate our BUY rating and roll forward our estimate to FY27E earnings. We value NCC at a P/E of 14x on FY27 EPS with a TP of Rs 340.
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SEBI Registration Number: INH200000345
