Execution is likely to pick up only in H2FY21 gradually while order inflows, cost rationalisation have been a positive surprise. The controlled debt levels also remain a solace. We highlight that execution traction and dues from AP will be key monitorables, going ahead. We also believe receipts from arbitration will be a big boost to liquidity amid the tough times. We note that NCC is currently trading at attractive 6.4x FY22E P/E. However, we would turn constructive only when we see an improvement in execution. We...

EBITDA margin declined by 238bps YoY to 9.8% due to subdued execution and fixed overhead expenses while sub-contracting & other expenses reduced by more than 50% YoY. Order book remain healthy at Rs27,916cr (3.9x TTM revenue)...

Operations resumed across all project sites with labour at 50-60% pre-covid levels. Expect labour to reach 80-90% levels by end of Sep'20. NCC posted decent set of numbers in a stressed scenario with revenues falling 46% YoY while EBITDA margins sustained at 9.8%. Company resumed...

However, EBITDA margin improved by 112bps YoY to 12.9% led by steep reduction in sub-contracting expenses and other expenses. Order book now stands at Rs26,572cr (3.2x TTM revenue) while NCC received fresh orders of Rs1,136cr in May 2020 & company expects tendering activity to pick-up from Q2FY21....

NCC received orders worth | 3801 crore in Q4FY20 and | 7172 crore in FY20. Consequently, NCC's standalone order book was at | 25,010 crore (book to bill ratio of 3x). We note that the company has removed most orders from Andhra Pradesh (AP). The AP order book is now at | 4,479 crore, which the company is confident on execution. The company expects the ordering activity to pick up from Q2FY21. On the execution front, work is now ongoing in almost ~90% of sites. However, owing to labour unavailability and supply chain issues, activity levels are at 50-70% of pre-Covid levels....

We maintain BUY with SOTP of Rs 48/sh as current valuation already price in weak execution. NCC Ltd. reported 4QFY20 PAT at Rs 1.1bn, down 36% YoY. Adjusting for exceptional items, APAT stood at Rs 1.0bn, beating our estimate by 27%. Although revenue missed our estimates, beat on PAT was largely driven by a) EBITDA margin expansion on favourable mix of projects b) lower depreciation, interest cost and taxes. FY20 revenue stood at Rs 82bn, down 32% YoY on back of removal AP works from order book. Order inflow also remained tepid in FY20 falling 63% YoY. We expect slower execution to continue in FY21 given Covid-19 led lockdown in 1QFY21.

NCC reported healthy 4QFY20 results better than our estimates driven by lower than anticipated impact on execution in its key projects, due to nationwide lockdown. Further construction activity gradually resumed towards end of Apr'20 with over ~90% of projects commencing operations (operating at 50-70% capacity). The company received disbursements on time from Central Government Agencies (including NHAI, AIIMS and Airports Authority of India), however some delays were witnessed from State Govt authorities as focus shifted towards welfare and health services. In addition...

NCC Ltd (NJCC) has reported a weak performance in 3QFY20 owing to muted revenue booking led by project cancellation and absence of convincing pick-up in construction activities post monsoon. Reported revenue declined by 34% YoY to Rs21.2bn vs. our estimate of Rs24.5bn, while EBITDA witnessed a de-growth of 36% YoY to Rs2.5bn. EBITDA margin contracted by 36bps YoY and 165bps QoQ to 11.8%. Adjusted profit declined by a sharp 66% YoY (10% QoQ) to Rs543mn mainly led by soft execution. Notably, NJCC has set aside slow-moving and likelyto-be-cancelled projects worth Rs71.3bn from its order backlog in order to have a clear visibility of revenue booking from the ongoing projects. Therefore, its current order backlog stands at Rs250.5bn, which is 2.7x TTM revenue and still gives decent revenue visibility. Going forward,...

NCC Ltd (NJCC) has reported a weak performance in 3QFY20 owing to muted revenue booking led by project cancellation and absence of convincing pick-up in construction activities post monsoon. Reported revenue declined by 34% YoY to Rs21.2bn vs. our estimate of Rs24.5bn, while EBITDA witnessed a de-growth of 36% YoY to Rs2.5bn. EBITDA margin contracted by 36bps YoY and 165bps QoQ to 11.8%. Adjusted profit declined by a sharp 66% YoY (10% QoQ) to Rs543mn mainly led by soft execution. Notably, NJCC has set aside slow-moving and likelyto-be-cancelled projects worth Rs71.3bn from its order backlog in order to have a clear visibility of revenue booking from the ongoing projects. Therefore, its current order backlog stands at Rs250.5bn, which is 2.7x TTM revenue and still gives decent revenue visibility. Going forward,...

NCC Ltd (NJCC) has reported a weak performance in 3QFY20 owing to muted revenue booking led by project cancellation and absence of convincing pick-up in construction activities post monsoon. Reported revenue declined by 34% YoY to Rs21.2bn vs. our estimate of Rs24.5bn, while EBITDA witnessed a de-growth of 36% YoY to Rs2.5bn. EBITDA margin contracted by 36bps YoY and 165bps QoQ to 11.8%. Adjusted profit declined by a sharp 66% YoY (10% QoQ) to Rs543mn mainly led by soft execution. Notably, NJCC has set aside slow-moving and likelyto-be-cancelled projects worth Rs71.3bn from its order backlog in order to have a clear visibility of revenue booking from the ongoing projects. Therefore, its current order backlog stands at Rs250.5bn, which is 2.7x TTM revenue and still gives decent revenue visibility. Going forward,...

Order book at | 25,049 crore; stalled AP orders removed NCC's standalone orderbook (OB) was at | 25,049 crore, 2.7x TTM revenues. This is lower than | 33,173 crore OB reported in Q2FY20 as it has proactively removed certain non-moving orders worth | 7,130 crore pertaining to Andhra Pradesh. With this, NCC's AP OB is now at | 4,429.3 crore, which is partly under execution. Deriving comfort from external funding of these projects, the company is confident of receiving payment for these orders. The company is L1 in projects worth | 2,000 crore. The management...

AP orders removal improves visibility on net executable order book and we believe this is already reflected in the price. AP NWC recovery of Rs 8.3bn is the key overhang now. NCC has resumed orders bidding and is likely to surprise positively on new order inflows for FY21E. TAQA out of court settlement may result in Rs 1bn hit for NCC. Sembcorp arbitration hearing is expected to conclude by Mar-20 with final judgment by Sep-20. We have cut FY20/21E EPS by 8.9/5.0%. Maintain BUY with reduced TP of Rs 106/sh. Key risks (1) Adverse ruling on ongoing arbitrations; (2) Slow down in government capex; (3) Deterioration in NWC days; and (4) Weak real estate monetization. NCC reported inline 3QFY20 financial performance, Rev/EBIDTA/APAT beat of 11.4/11.5/0%. With removal of Rs 71bn of slow moving AP orders net executable order book stands at Rs 250bn. We maintain BUY with reduced TP of Rs 106/Sh (EPC business at 15x FY21E EPS) vs. Rs 111/sh earlier.

Management have reduced its revenue guidance to Rs90bn (from earlier guidance of Rs100bn), with EBITDAM in the range of 11-12% NCC is one of the largest and well-diversified construction companies in India having expertise and experience in every segment of construction sector....

Order book at | 33,173 crore; tones down revenue guidance NCC's standalone order book (OB) was at | 33,173 crore, 3.1x TTM revenues. This includes | 12,000 crore orders pertaining to Andhra Pradesh (| 6,600 crore is Amravati Capital City projects, | 4,300 crore affordable housing projects and | 1,100 crore water/irrigation projects). In AP, NCC is executing water/irrigation projects worth | 1,100 crore where it is not facing payment issues. Clarity on balance ~| 11,000 crore projects is awaited from AP state government. In terms of order inflow, NCC received order inflows...

Extended monsoon, delays in water division payment from Telangana Govt and resurvey/change in scope of electrical division orders impacted 2QFY20 execution. AP orders resumption remains a black box. Despite this, we believe that 2QFY20 is an execution bottom for NCC. We have built in Rs 23/32bn revenue for NCC during 3Q/4QFY20. We are now entering bid heavy 2HFY20 and NCC stands to gain from the same. Resumption in AP order execution (from 3QFY20) and likely favorable Sembcorp settlement by Mar-20 (unlocking Rs 4-5bn of cash inflow) are key re-rating tailwinds. We have cut FY20/21E EPS by 22.4/18.2%. Maintain BUY with reduced TP of Rs 127/sh. Key risks (1) Adverse ruling on ongoing arbitrations; (2) Slow down in government capex; (3) Deterioration in NWC days; and (4) Weak real estate monetization. NCC reported a weak headline 2QFY20 performance, Rev/EBIDTA/APAT miss of 22/11/38%. With tailwinds like (1) Resumption of stuck AP orders (Rs 110bn, 33% order book) (2) Pick-up in new order inflow & (3) Sembcorp settlement, NCC de-rating may have settled for now. We maintain BUY with reduced TP of Rs 127/Sh (EPC business at 15x FY21E EPS) vs. Rs 154/sh earlier.

NCC Ltd. (NJCC) has reported better-than-expected operating performance in 2QFY20 despite missing our estimate on revenue front. While revenue declined by 44% YoY to Rs17.3bn vs. our estimate of Rs19.3bn, EBITDA came in ahead of estimates at Rs2.33bn (-36% YoY and -13% QoQ) vs. our estimate of Rs2.22bn. EBITDA margin improved by 170bps YoY and 127bps QoQ to 13.5% vs. our estimate of 11.5%. Notably, claims worth Rs310mn booked pertaining to three Maharashtra projects led to higher margin, adjusted for which its margin stood at 11.7%. APAT declined by 62% YoY to Rs601mn marginally ahead of estimate of Rs587mn mainly led by better operational performance. NJCC secured order worth Rs15.2bn during the quarter...

View: Another bad quarter, recovery in FY21E; maintain Buy NCC reported lower than expected numbers on all fronts. NCC posted weak set of numbers with 44.2%/ 36.2%/ 82.7% YoY degrowth in Revenue/ EBITDA/ APAT to `17.3 bn/ `2.3 bn/ `300 mn due to lower execution coupled with higher depreciation + interest cost...

However, EBITDA margin improved by 84bps YoY to 12.2% led by lower material cost and drop in sub-contracting expenses. Order book now stands at Rs33,495cr (2.8x TTM revenue), however, projects worth Rs12,500cr is still constituting from AP region where company is facing issues with the state government....

Standalone orderbook at | 33,495 crore as of Q1FY20 NCC's standalone orderbook (OB) was at a strong | 33,495 crore, 2.8x TTM revenues, providing strong revenue visibility ahead. The overall OB has declined QoQ as the management has removed orders worth | 6,100 crore in Andhra Pradesh that it had earlier indicated were uncertain following a state government notification. Adjusting this, NCC has | 12,500 crore orders (~37% of total order book) from AP, which consists of Amravati capital city (| 6,500 crore), APTIDCO housing project (| 4,975 crore) and Water &...

Poor Performance on Soft Execution & Projects Disruption in AP NCC (NJCC) has reported a poor performance in 1QFY20, as projects cancellation, reassessment of projects and payment delays impacted its revenue booking. Resultantly, revenue declined by 7% YoY and 35% QoQ to Rs21.8bn. EBITDA broadly stood flat on YoY basis at Rs2.66bn, while EBITDA margin stood at strong 12.2% (+84bps YoY and +45bps QoQ) mainly led by settlement of claims with the clients during the quarter. Dismal revenue booking along with higher finance cost (+24% YoY and +8% QoQ) and lower other income (-15% YoY and -31% QoQ) led to steep 21% YoY decline in net profit to Rs813mn. A high exposure in AP and political shift in the state along with general slowdown led by...