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Healthy inflows to lead to trend reversal

NCC (NJCC IN) had fallen 38% from its peak in the past eight months due to delayed payments by government projects. This had led to execution challenges, a rise in debt and downgrade in revenue and EBITDA guidance. However, in the past few days, the company has witnessed a strong uptick in order awarding, led by inflows worth INR 150bn in Q4FY24 which is higher than INR 136bn in 9MFY24, taking the total inflows for the year to ~INR 286bn, outperforming the guided INR 200-220bn. Also, expect the traction in order awarding activity to continue as Andhra Pradesh state witnessing pickup in momentum and NJCC had been a key beneficiary in the previous regime of the same state government. On the back of strong inflows and better revenue visibility, we believe the stock price trend for NJCC is set to reverse. So, we upgrade NJCC to Buy with TP raised to INR 278 on FY27E P/E of 15x (unchanged).

Inflows worth INR 150bn in Q4FY24 lift visibility: Total order inflow in Q4FY25 stood at INR 150bn, taking the total standalone inflows to INR 286bn, with key contribution emanating from Bharat Sanchar Nigam for BharatNet infrastructure in Uttarakhand and Madhya Pradesh (worth INR 108bn together). The EPC component stands at INR 57bn, executable over three years and the balance is O&M work, executable over 10 years post execution. Other works include projects related to the development of the Andhra Pradesh capital region and building projects in Bihar. The strong inflows thus raise book-to-bill visibility to 3.3x from 2.7x in December 2024.

Capital expenditure resumes in Andhra Pradesh: The recently announced state budget for Andhra Pradesh is targeting a 69% increase in capital expenditure in FY26 to INR 402bn (highest ever), which is the sharpest growth amongst among all the states. During March 2025, orders awarded by the Andhra Pradesh government accelerated and the Capital Region Development Authority approved tenders for 59 projects worth INR 377bn. The authority also announced L1 bidders for 22 projects worth INR 226bn. Further, Amaravati Development Corporation implemented 37 projects worth INR 150bn, funded by multilateral agencies. Per Telangana Today, The Telugu Desam Party has invited the Prime Minister in April 2025 to mark the resumption of greenfield construction work for the capital city of Amaravati. The Chief Minister has announced that the foundation for investments worth INR 1trn will be laid in the next 45 days. The state government has signed a loan agreement with HUDCO for INR 110bn and with World Bank for INR 150bn and is targeting to complete capital development works in the next three years.

Upgrade to Buy; TP raised to INR 278: Underpinned by a strong uptick in order awarding led by inflows worth INR 150bn in Q4FY24 and uptick in revenue visibility to 3.3x, NJCC is set for a robust revenue growth trajectory. Also, as Andhra Pradesh witnesses an uptick in capex, NJCC is set to emerge as a key beneficiary. So, we raise NJCC’s earnings for FY26E by 14% and for FY27E by 23%. Upgrade to Buy from Accumulate, with TP raised to INR 278 (from INR 227), based on FY27E P/E of 15x (unchanged). Key risks to our call are delays in new project awarding and postponement in commencement of execution due to approvals or irregular payments.

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