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Weak quarter; Maintains guidance on all fronts

NCC’s adjusted PAT declined by 26% YoY to INR 1.6bn and was sharply below JMFe of INR 2.37bn (consensus: INR 2.44bn) due to lower revenue/margins and higher interest costs. Gross debt reduced marginally from INR 18.2bn in June-24 to INR 17.3bn in Sept-24 (Sept23: INR 14.7bn). NCC has received INR 2.2bn from AP government in 2Q25 and outstanding receivables stand at INR 4.5bn as on Sept-24. Also, AP orders worth INR 50bn which were stalled earlier (not part of current order backlog) could come back as NCC is in talks with the AP government which would further boost the order backlog. NCC has maintained its revenue guidance of 15%+ growth with EBITDA margins of 9.5-10% (closer to lower end of guidance) along with order inflows guidance of INR 200-220bn for FY25E (YTD inflows + L1: INR 180bn). We have cut FY25/26E EPS by 4%/2% factoring lower execution. NCC’s standalone order backlog stood at INR 480bn (2.5x TTM revenues) as on Sept-24. Maintain Buy with revised price target of INR 365 (EPC business valued at 17x Sept-26 core EPS)

* Earnings sharply below JMFe due to lower execution/margins: NCC’s revenue remained flat YoY at INR 44.5bn and was below JMFe of INR 52bn impacted by lower JJM execution and extended monsoon. EBITDA declined sharply by 16% YoY to INR 4bn (JMFe: INR 4.9bn). EBITDA margins contracted sharply by 170bps YoY to 9% (JMFe: 9.5%) due to lower gross margins (15.2% in 2Q25 vs. 15.7% in 2Q24) and higher employee costs. Interest costs grew by 7% YoY to INR 1.65bn (JMFe: INR 1.55bn) due to higher average debt levels during the quarter.

* Bid pipeline robust; guidance maintained on all fronts: NCC received strong order inflows of INR 87bn in YTD and is L1 in orders of INR 92bn. Standalone order backlog stood at INR 480bn (2.5x TTM revenues). NCC’s bid pipeline stands strong at INR 2.1tn driven by Buildings, Transportation, Water and Electrical verticals. NCC maintained its guidance of 15% revenue growth with EBITDA margins at 9.5-10% (closer to lower end of range) and order inflows of INR 200-220bn.

* AP recoveries picks up pace; received part proceeds of Vizag sale: NCC has received INR 2.2bn from AP government in 2Q25 and outstanding receivables stand at INR 4.5bn as on Sept-24. In Vizag deal, out of equity portion of INR 2bn, NCC has received INR 1.9bn till date. Outstanding loan of c.INR 3.8bn is expected to be received over next two years. NCC has seen good progress in Bihar smart meter project while Maharashtra smart meter project has been moving slowly as the government has deferred the project and NCC expects to pick up pace post elections.

* Business on strong footing: NCC has survived adverse business cycles and is showing marked improvement in operations and working capital management. Also, faster recovery of AP receivables and part receipt of Vizag deal proceeds will further strengthen the balance sheet. We expect robust revenue/EPS CAGR of 16%/23% over FY24-27E. Also, we expect RoE/RoCE to rebound from 12.7%/ 12.6% in FY24 to 16.3%/15.5% in FY27E led by strong growth and improved balance sheet. Stock is currently trading at 16.6x/13.5x FY26/27E core EPS. We value NCC at 17x Sept-26E core EPS (ex of other income) to arrive at a revised SoTP based price target of INR 365. Maintain BUY.

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