NCC Ltd. share price target

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.

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...