NCC Ltd. share price target

NCC Q1FY17 operational performance was in-line with our expectations. Revenue increased 11% YoY to Rs 18.9bn, led by pick up in execution. EBITDA increased moderately by 5% YoY to Rs 1.65bn as the margin declined 50 bps YoY to 8.7%. Other income declined sharply by 45% YoY (in-line with estimate) due to decline in other income from monetized subsidiaries. Interest cost declined 26% YoY on account of repayment of expensive debt. Thus, adjusted PAT increased 27% YoY to Rs 523 mn. For FY16, Revenue is flattish YoY to Rs 83.2 bn while EBITDA/PAT increased 14% YoY/117% YoY (led by 103 bps increase in OPM and 11% YoY decline in interest cost).

NCC is a Hyderbad based construction company targeting order inflows of Rs 12,000 crores in FY17. So far it has bagged orders worth Rs 3,000 crores which includes order of Rs 1,380 crores water project from Telangana government. The company's total order book stands close to Rs 20,000 crores as of now. The company sees strong opportunities in roads, buildings, irrigation and water sectors.

NCC's business divisions are categorized as Building & Housing, Transportation, Electrical, Water & Environment, Irrigation, International, Power, Metals and Oil & Gas Division. Apart from the conventional construction and other methods, the company adopts the NBS Cellular System, developed in collaboration with Byyging Uddheman AB of Sweden and NCC Pre Fab System, which is developed in house.

Reported PAT grew robustly by 38.1% YoY to | 70.0 crore. Adjusting for an exceptional item of | 20.3 crore in Q4FY16, the net profit grew 78.2% YoY to | 90.4 crore and was well above our estimate of | 60.4...

Topline at Rs 24.5bn (+11% yoy) significantly ahead of our/street estimates. EBITDA margins at 8.5% - inline with expectations, especially with neglible other operating income' of Rs 60mn (vs. Rs 545mn in 1HFY16)....

NCC secured orders worth Rs 1870cr in Jan'16, taking the order book to Rs 19470cr as of date. Management expects to achieve its full-year inflow target of Rs 8000cr led by a strong pipeline of irrigation projects from Telangana, hybrid-annuity projects from NHAI and urban development projects from the public sector.

Topline at Rs 20.5bn (13% yoy) inline with our/street estimates. The power plant contributedRs3bntothetoplinein3QFY16(Rs9bnin9MFY16,Rs31bninFY15). EBITDA margins at 9.0% were ahead of expectations, especially with neglible other...

NCC Ltd. (NCC) delivered strong 3QFY16 profit beat, 74% ahead of our estimates. EBITDA margins expanded 163bps to 9.03%, primarily because of 284bps contraction in material expenses. The B/S was healthy with net debt at Rs 20.6bn (Rs 0.2bn increase QoQ) and net D/E at 0.62x (vs. 0.62x end-FY15). Debtors stood at 70 days vs. 60 days QoQ.

For 2QFY2016, NCC reported a favorable standalone earnings performance, reflecting better than expected execution, and lower yoy interest expenses owing to decline in debt. On the top-line front, NCC (standalone) reported a 6.6% yoy decline to Rs2,096cr. On a sequential basis, the top-line grew 21.7%. Stronger execution seen across Water, Environment & Railways (WER) and the Buildings and Roads (B&R;) segment, and sale of a land parcel (worth Rs29.9cr), contributed to the better-thanexpected 2QFY2016 revenues. NCC reported a 72bp yoy EBITDA margin improvement to 8.8%, owing to 21.3% yoy decline in raw material expenses and real estate transaction. Expansion in EBITDA margin on yoy basis coupled with lower yoy interest expenses led to PAT coming in at Rs55cr for the quarter as against Rs22cr in 2QFY2015. NCCs outstanding order book as of 2QFY2016 stands at Rs17,487cr (exc. international business, order book to LTM sales ratio stands at 1.8x), indicating a 14.3% yoy decline. Outlook and valuation: NCCs stock price has run-up by 36.9% in the last 12 months, mainly owing to the balance sheet de-leveraging exercise pursued by the company. NCC aims to repay debt by around Rs200-300cr through proceeds of stake sale. However stretched working capital cycle will likely...