NCC Ltd. share price target

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...

NCC has seen significant de-rating post the AP Govt order cancellation and uncertainty of execution on balance Rs 125bn of AP order book. Our channel checks will local Govt officials suggest work of significant importance will start in next 3months. We ascribe low probability of further project cancellation for NCC in AP. Debt levels may remain at current levels, though AP receivable realization may take time. Sembcorp arbitration will unlock Rs 4-5bn of cash inflow. With inexpensive valuation (6.3x Core EPC FY21E EPS) and receding headwinds we maintain BUY. 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 1QFY20 performance with Rev/EBIDTA/APAT beat of (4.5)/2.5/1.6%. We expect AP projects execution to resume from Oct-19. Core EPC valuation is inexpensive at 6.3x FY21E EPS. Maintain BUY with a TP of Rs 154/Sh (EPC business at 15x FY21E EPS).

We spoke with Y D Murthy, Executive Vice President Finance, of NCC Ltd (NJCC) for an update on Andhra Pradesh work orders.

After the formation of new state government in Andhra Pradesh, the government has announced cancellation of some infra projects sanctioned by previous government prior to April 1, 2019. As per government, It is noted that a number of engineering works were...

As per media reports, new AP government cancels all tenders sanctioned under previous government As per media reports, in Andhra Pradesh, the YS Jaganmohan Reddy government has taken a crucial decision to stop works that were sanctioned (during the Chandra Babu Naidu government) but not grounded. It would also review the ongoing works before making payments. The media reports indicate that the state chief secretary LV Subrahmanyam has issued the orders on behalf of the finance department and suggested that all works...

Solid execution in road, building and electrical division led to a top -line growth of 42% YoY in Q4FY19. Order book remain robust at Rs39,216cr (3.2x TTM revenue) supported by 272% YoY growth in order bookings in Q4FY19. Despite, increase in execution EBITDA margin remains flat at 11.7% due to increase in sub-contracting and other expenses....

Standalone orderbook at strong | 39,402 crore as of Q4FY19 NCC witnessed robust order inflows worth | 25,612 crore in FY19 taking its standalone orderbook (OB) to | 39,402 crore, 3.3x TTM revenues, providing strong revenue visibility ahead. This OB is after de-scoping of slow moving or uncertain projects. Buildings (39%), roads (21%), water (23%) and electricity (4%) divisions make up 85% of the OB. On the customer front, 99% of the orders are from government entities. While NCC has a strong OB position, given the high base created on account of robust execution and...