Accumulate NCC; target of Rs 112: Dolat Capital
Dolat Capital’s research report on NCC
NCC posted 33.3% YoY de-growth in Q2FY18 standalone revenue to `13bn (35.8% below estimates). The fall in revenue was primarily due to GST related issues. EBITDA margin increased 78bps YoY to 9.6% (41bps above estimates) due to lower construction expenses which was partially offset by higher employee cost and other expenses. Adj PAT (post adjusting non-cash exceptional loss of `590 mn on account of stake sale in Tellapur Technocity) grew 70.8% YoY to `793mn (25.9% above estimates). NCC (standalone) bagged historical high orders worth `1489bn during YTDFY18 leading to highest ever standalone order book to `258bn (Oct’17) providing revenue visibility for 3.5x TTM revenue. Considering sharp surge in order inflow, we upgraded our order inflow estimates to `1788bn (earlier `1036bn) / `98.3bn (earlier `92.9bn) for FY18E/ FY19E. We have downgraded/ upgraded our revenue estimates by 6.9%/ 1.6% for FY18E/ FY19E to factor in 1HFY18 nos/ higher order inflow. We expect 1.7% (close to management guidance) YoY growth in revenue for FY18E and 15.5% for FY19E and maintained EBITDA margin at 9.2%/ 9.5% for FY18E/ FY19E. We expect debt to rise in FY18E and FY19E due to encashment of `2.9bn BG by its client (Nellore Power Project) in Nov’17. Accordingly, interest cost will reduce at much slower pace due to lower interest rate and savings in bank charges led by improvement in ratings.
We expect 13.1% CAGR in Adj. PAT over FY17-20E. We maintain ACCUMULATE on the stock with SOTP based TP of `112 as we roll over to FY20E (Exhibit 1).
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