IGI Logo

Upside risk to the guidance

NCC reported a strong Q2FY27 performance, with standalone revenue growing 31% YoY, driven by improved execution across key divisions, while EBITDA margin expanded 100bps YoY to 8.5%. Management retained its FY27 guidance of 8–10% revenue growth, 8.5–9.0% EBITDA margin and INR 220–250bn order inflows, which we believe is conservative, leaving room for upside. Improved execution momentum has led us to upgrade our EPS estimates by 9%/7%/1% for FY27E/FY28E/FY29E, respectively. On the balance sheet front, trade receivables declined to INR 27.0bn and unbilled revenue moderated to INR 71.7bn, while improving JJM collections are expected to support working capital and enable debt normalisation by FY27-end. NCC's standalone order book remains robust at INR 712.9bn (~3.5x TTM revenue), with the company having achieved ~50% of its FY27 order inflow guidance, including October awards. We retain BUY with a revised TP of INR 201, valued at 13x 1HFY29 EPS. Key monitorables remain sustained order inflows and a ramp-up in execution.

Strong Quarter:

NCC reported standalone revenue of INR 49.2bn, registering 32% YoY growth and exceeding our/consensus estimates by ~20%, primarily driven by higher execution across the Mining, Buildings and other project divisions. EBITDA increased 50% YoY to INR 4.2bn, with EBITDA margin remaining stable at 8.5%. PAT stood at INR 1.6bn, up 60% YoY, supported by improved operational performance and a favourable base in the corresponding quarter last year. The company secured fresh order inflows of INR 42bn during the quarter, taking its standalone order book to INR 713bn, providing healthy revenue visibility of ~3.5x TTM revenue.

Guidance:

Management retained its FY27 guidance of INR 220–250bn order inflows, 8– 10% revenue growth and an EBITDA margin of 8.5–9.0%. Including October order wins, cumulative order inflows stood at INR 111.1bn, providing confidence in achieving the annual guidance. The company maintained its FY27 Capex guidance of INR 5bn, with INR 2.53bn already deployed during H1FY27. Management expects working capital and debt levels to improve towards March 2026 levels by FY27-end, supported by better collections and improving payment flows, particularly from JJM projects. For FY28, CapEx is expected to remain broadly similar, although the Amarbhali mining project may entail additional investment requirements.

Order book Strong:

NCC reported a consolidated order book of INR 801.7bn as of Q2FY27, providing a healthy book-to-bill ratio of ~3.5x, ensuring strong multi-year revenue visibility. The order book remains well diversified across segments, led by Buildings (28%), followed by Transportation (20%), Electrical T&D (15%), Mining (15%), Water & Railways (15%) and Irrigation & Others (7%), limiting concentration risk. During Q2FY27, the company secured fresh orders worth INR 48.4bn, taking cumulative order inflows to INR 111.1bn, including October awards. Standalone order book stood at INR 712.9bn

JJM Execution Improves; Payment Cycle Shows Signs of Normalisation:

Management indicated improving execution and payment visibility under JJM, with government payments now being received more regularly. The legacy UP JJM order backlog of ~INR 32bn is expected to be substantially completed by March 2027, while the current project backlog of ~INR 21.3bn is progressing well. Total JJM outstanding across states declined to INR 22.5bn, including trade receivables of INR 3.44bn and unbilled revenue of INR 20.1bn. Having received ~INR 17.2bn towards JJM projects in H1FY27, management expects payment-related challenges to ease and remains open to pursuing fresh opportunities in other states, including Andhra Pradesh. Overall, improving collections and the gradual completion of legacy projects should support working capital normalisation.

Please refer disclaimer at Report
SEBI Registration number is INH000000933