NCC Ltd. share price forecast

CESC: CESC's consolidated PAT in Q1FY23 increased by 6.1% YoY to INR3.0bn, led by higher earnings at Dhariwal (from a new PPA with Railway Energy Management CompanyREMCL), Noida Power (high power demand) and turnaround in the Rajasthan distribution franchisee (DF) segment (a profit of INR60mn vs a loss of INR110mn YoY). These were partially offset by increased losses in the Malegaon DF business (a loss of INR190mn vs profit of INR20mn YoY) and lower profitability in the Haldia business (INR660mn vs INR900 mn). Standalone PAT remained flat YoY. WBERC awarded multi-year tariff for FY21-23 and annual performance review for FY15-18, but the decision on regulatory assets stands deferred. We have not included the Chandigarh discom in our valuation as CESC is yet to receive a letter of intent (LoI). We maintain our earnings estimates for FY23/24 and retain BUY, with a TP of INR113. Borosil Renewables: Borosil Renewable's (BRL) Q1FY23 PAT declined 24% YoY to INR301mn as the cost of raw materials, fuel and power expenses continued to remain elevated in the quarter. Realisation was slightly better QoQ at INR141/sqmm (flat YoY), but the company was unable to pass on the escalated input cost to its customers due to intense competition from Chinese players; hence, this impacted its EBITDA and margin by 22% YoY and 1,715 bps respectively. The quantitative sales volume grew 23% YoY and BRL reported revenue growth of 25% YoY to INR1,700mn in Q1. Though it would be tough for BRL to sustain its profitability amidst steep rise in input costs, we do...

Orient Electric: Orient Electric (Orient) delivered a subdued revenue performance due to the company's stance on protecting its margins and delayed channel filling towards the close of peak season. Revenue declined 6% YoY (HSIE +12%) due to 11% decline in ECD segment (HSIE +8%). With Jan/Feb seeing disruption in trade, the company focused on filling channel inventory in the peak season (Q1FY23). Thereby, primary numbers for ECD are weak in Q4 despite healthy secondary/offtake (trade inventory was low while company inventory was high at the end of March). With sustaining market share, we expect ECD to bounce back strongly in Q1. This move helped the company maintain its gross margin YoY and sequentially. Lighting & switchgear segment sustained demand momentum. While we remain bullish on ECD and especially fans as a long-term play, we believe that, amongst the top peers, Orient lags on execution. We, therefore, cut our target P/E to 35x on FY24E EPS, from 38x earlier. We cut our FY23/24 EPS by -4/-5%. We downgrade our BUY rating to ADD, with a revised TP of INR 340. NCC: NCC Q4FY22 revenue/EBITDA/APAT came in at INR 31/2.7/1bn, with EBITDA and PAT missing our estimates. The higher raw material prices impacted margin by 110bps, compared to Q4FY21 when it was 11.1%. With order inflow (OI) of INR 99bn in FYn22, the order book (OB) stood at INR 393bn (incl. subs). Strong order inflows are expected in Q1FY23, with a major sewage treatment plant order in Mumbai. NCC expects revenue growth of 10-15% in FY23, with an...

Well-diversified order backlog, robust execution capabilities, proficient management and strong focus on debt reduction and working capital are expected to outline NCC over the next few years Q2FY22 Results: NCC's Q2FY22 performance was on expected lines - strong...

NCC Limited (NCC) is one of the largest well diversified construction companies in India with a foothold in every segment of construction sector. Q2FY22 revenue grew by 43% YoY (better than estimate) as construction back to normalcy and sites are operating at precovid levels. However, EBITDA margin declined by 286bps YoY to 10.8% due to higher commodity prices and higher sub-contracting expenses (45% YoY). Order book remain healthy at Rs39,112cr (4.5x TTM revenue) supported by a strong inflow of Rs5,611cr in H1FY22....

NCC Limited (NCC) is one of the largest well diversified construction companies in India with a foothold in every segment of construction sector. Q4FY21 revenue grew by 20% YoY led by ramp up in execution on account of better availability of workforce. EBITDA margin declined by 179bps YoY to 11.1% due to higher input costs and higher sub-contracting expenses (54% YoY). Order book remain healthy at Rs37,911cr (5.2x FY21 revenue) supported by strong inflow of Rs18,953 in FY21. As per company, the second wave of Covid is expected to impact...

NCC reported a decent set of numbers in Q4FY21 with revenue growth of 20% YoY to | 2617.7 crore on a standalone basis. The topline growth was mainly driven by strong order book position and pick-up in execution. However, operating margin declined 179 bps YoY to 11.1% owing to higher sub-contracting expenses. Consequently, operating profit improved merely 3.3% YoY to | 289.7 crore. At the net level, a decent operating performance coupled with benign depreciation and interest cost has translated into 11.4%...

impacted at 10-15% below pre-covid levels in Apr-May'21. NCC reported strong quarterly numbers as revenues came in above our and street estimates owing to ramp in execution across its project sites. However, Liquidity position continues to remain robust on the back of reduced debt (Rs1.2bn in FY21), lower rate Covid loans and reduced performance BG requirements. Management expects the working capital levels to ease further as group companies' exposure is expected to reduce in FY22 (Rs1.6bn reduction in FY21) and receivable from AP Govt. for stalled projects (Rs1.2bn...

TOP PICKS: LT, KNR, PNC Infra, Ashoka, NCC, Capacite Infra, ITD and KPTL. HDFC Securities Institutional Equities (HSIE) hosted the 4th Annual Infrastructure Investors Forum on 18/19th Feb 2021, though virtual this time. We had attendees from 12 large listed Industrials/Infrastructure companies represented by Promoters, CEO/CFO/IR teams. After almost a decade, there is strong/consensus optimism building up for the Indian Infrastructure story. Ordering has moved beyond roads with focus now on health, education, portable water, renewable energy, manufacturing expansion, uptick in real estate cycle and all this is coinciding with relatively lower crude prices, lowest interest rate and improving GDP/Tax collection. Companies remain bullish whilst valuation is still at 40-50% discount to cross cycle mean. We maintain constructive as envisaged in our thematic On Road to Rerating and Triggering a New Cycle.

Strong inflows boost order book; execution set to pick up NCC's order book at the end of Q3FY21 was strong at | 39,182 crore (book to TTM bill ratio: 5.7x) mainly backed by healthy order inflows of ~| 20000 crore secured during 9MFY21 (and | 1200 crore, thereafter in January, 2021). Going forward, the management has indicated towards strong momentum in different infrastructure verticals and has guided for ~| 2,000 crore of order inflows in the remaining period of FY21. On the execution front, NCC has witnessed QoQ improvement in the topline performance over the past few...

Rs77bn) with blended EBITDAM in the range of 12%. NCC reported weak quarterly numbers as revenues came below our and street estimates due to tepid execution levels. However, rigid cost control disbursements from Central and State Govt. authorities and easing of finance cost burden (down 25% YoY) with lower interest rates and reduced performance BG requirements. Due to lower than anticipated 9M execution levels, management reduced FY21 revenue guidance to Rs71-72bn (earlier Rs77bn) but maintained strong optimism going ahead led by strong order...

Labour migration and supply chain disruption has largely impacted NCC's performance during H1FY21. Going ahead, we expect a gradual recovery from H2FY21 with key solace being controlled debt levels. We note that NCC is currently trading at 6.2x FY22E P/E. However, we would turn constructive only when we witness an improvement in working capital. We assign HOLD...

Q2FY21 revenue declined by 11% YoY (better than estimate) as monsoon & labour availability impacted execution. EBITDA margin improved by 16bps YoY to 13.6% due to cost control measures and better product mix. Order book remain healthy at Rs29,360cr (4.2x TTM revenue)...

Q2FY21 vs 55-60% in Q1. Despite the pandemic scenario, working capital levels have been effectively managed on the back of timely disbursements from Central and State Govt authorities (except some projects in AP & Telangana). Further, lowering of interest rate and availing low interest Covid loan of Rs1.8bn has led overall blended interest rate to come down 9.3%. With operations nearing pre-covid efficiency levels in H2, robust order inflows and...

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)...

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...

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....