NCC Ltd. share price target

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....