NCC (NAGCON)
CMP: ₹ 316 Target: ₹ 395 (25%) Target Period: 12 months BUY
June 28, 2024
Amravati Capital City project to boost incremental
order opportunity
Company Update
About the stock: NCC is one of the leading construction companies with presence Particulars
across varied verticals of infrastructure space such as buildings, roads, water, Particular ₹ crore
mining and electrical. Standalone order book stood at ₹ 51,483 crore as of FY24. Market Cap 19,868
• Well-diversified order backlog, robust execution capabilities, and strong Total Debt FY24 1,005
focus on working capital to be key over next few years. Cash FY24 1,044
EV 19,829
Investment Rationale: 52 week H/L (₹) 338 / 119
Equity capital 125.6
• Revival of Amravati Capital City could drive incremental order
Face value 2.0
opportunity: The formation of the new government in Andhra Pradesh is
likely to drive revival of the Amravati Capital City project. NCC could be Shareholding pattern
J un- 2 3 Se p- 2 3 D e c - 2 3 M a r- 2 4
presented with a new ordering opportunity as we note that it previously Pro mo ters 22.0 22.0 22.0 22.0
had orders to tune of ~₹ 6600 crore from Amravati in 2017-18, large part DII 12.3 11.0 10.5 10.6
of which got cancelled in 2019. Furthermore, revival of the Polavaram FIIs
Other
22.5
43.3
24.2
42.8
23.9
43.6
27.3
40.0
Irrigation Project, could also further drive ordering opportunity in the water
Price Chart
segment for NCC.
360 24000
• Poised for a healthy execution ahead with strong order book: NCC has
300
ICICI Securities – Retail Equity Research
standalone order book of ₹ 51,483 crore, (~2.8x book to bill ratio), largely 18000
240
aided by ₹ 18,439 crore (up 37% YoY) worth of orders secured in FY24 on 180 12000
standalone basis. On consolidated basis, order book stood at ₹ 57,536 120
6000
crore, driven by order inflows of ₹ 27283 crore. The company has guided 60
for an order booking of about ~₹ 20,000 - 22,000 crore, with ordering likely 0 0
Jun-21
Dec-21
Jun-22
Jun-23
Jun-24
Dec-22
Dec-23
to be impacted in 1HFY25 owing to elections. The topline growth guidance
is ~15% for FY25. Given the robust orderbook, we expect healthy revenue
CAGR of ~15% over FY24-26E to ₹ 24209 crore. NCC (LHS) Nifty
• Strong earnings growth momentum & higher return ratios Key risks Key Fin
ahead: The EBITDA margin guidance is 9.5% -10% for FY25, amidst the • Lower than expected order
competitive bidding scenario, and with company focussing on revenue inflows
growth momentum in FY25 over margins. With healthy execution, we bake
• Heightened competitive
in EBITDA margins at 10%/10.5% in FY25/FY26 vs. 9% in FY24 (~10% on
intensity impacting margins
adjusted basis). Healthy topline growth coupled with stable finance cost is
likely to drive ~27.9% earnings CAGR over FY24-26E. The strong earnings Research Analyst Key Fi
momentum will translate into improvement in return ratios, with RoEs
Bhupendra Tiwary, CFA
likely to expand to 15.4% in FY26 vs. 12.3% in FY24. [email protected]
Hammaad Ahmed Ulde
Rating and Target Price
[email protected] • NCC is a key beneficiary of the tailwinds in the buildings, roads, water,
mining and electrical segments. Given the strong order book visibility, and
improving balance sheet strength, it is poised for a healthy growth ahead.
• We value NCC at ₹ 395, at 18x FY26 P/E, and maintain our BUY rating
on the stock
Key Financial Summary
₹ crore FY21 FY22 FY23 FY24E 5 year CAGR (FY19-24) FY25E FY26E 2 year CAGR (FY24-26E)
Net Sales 7,256 9,930 13,351 18,314 8.7% 21,053 24,209 15.0%
EBITDA 855 996 1,343 1,648 3.0% 2,105 2,547 24.3%
EBITDA Margin (%) 11.8 10.0 10.1 9.0 10.0 10.5
Adj. PAT 261 344 569 837 8.2% 1,048 1,370 27.9%
Adj. EPS (₹) 4.3 5.6 9.1 10.1 16.7 21.8
P/E (x) 73.8 39.4 34.9 31.5 19.0 14.5
EV/EBITDA(x) 24.1 20.0 14.6 11.7 9.2 7.4
RoNW (%) 4.9 5.9 9.0 12.3 13.6 15.4
RoCE (%) 11.2 13.3 17.9 20.1 23.1 26.2
s
Source: Company, ICICI Direct Research
Company Update | NCC Ltd. ICICI Direct Research
Financial Summary
Exhibit 1: Profit and loss statement ₹ crore Exhibit 2: Cash flow statement ₹ crore
₹ crore FY23 FY24 FY25E FY26E ₹ crore FY23 FY24 FY25E FY26E
Net Sales 13,351 18,314 21,053 24,209 Profit after Tax 569 631 1,048 1,370
Other Income 152 124 139 167 Depreciation 200 209 225 244
Total revenues 13,504 18,439 21,192 24,376 Prov for Taxes 71 78 118 216
CF before wc changes 977 1,258 1,785 2,204
RM Exp. 4,751 7,277 7,642 8,740 Change in WC 231 (181) 130 (889)
Employee exp 520 641 737 847 Taxes Paid (131) (209) (291) (366)
Constr. exp 6,431 8,448 10,190 11,645 Net CF from op. activities 595 960 384 962
Other Exp 307 301 379 431
Total op exp. 12,009 16,666 18,947 21,662 (Purchase)/Sale of FA (314) (256) (250) (250)
(Purchase)/Sale of Inv. 62 (190) - -
EBITDA 1,343 1,648 2,105 2,547 Net CF from inv. activities (253) (446) (250) (250)
Interest 510 595 605 629 Change in Debt (205) 25 95 (500)
Depreciation 200 209 225 244 Other - - - -
PBT 785 911 1,414 1,841 Net CF from fin. activities (255) (115) (62) (688)
Taxes 216 280 366 471
PAT 569 631 1,048 1,370 Net Cash flow 87 399 72 24
Adjusted PAT 569 837 1,048 1,370 Opening Cash 559 646 1,044 1,116
EPS 9.1 10.1 16.7 21.8 Closing Cash 646 1,044 1,116 1,140
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research
Exhibit 3: Balance Sheet ₹ crore Exhibit 4: Key ratios
₹ crore FY23 FY24 FY25E FY26E FY23 FY24 FY25E FY26E
Equity Capital 126 126 126 126 Per Share Data
Reserve and Surplus 6,196 6,687 7,578 8,759 Reported EPS 9.1 10.1 16.7 21.8
Shareholders funds 6,322 6,813 7,704 8,885 Cash EPS 12.2 13.4 20.3 25.7
BVPS 100.7 108.5 122.7 141.5
Total Debt 980 1,005 1,100 600
Other Non-curr. Liab. - - - - Operating Ratios
Def.Tax Liability (48) (59) (59) (59) EBITDA / Net Sales 10.1 9.0 10.0 10.5
Source of Funds 7,254 7,759 8,745 9,426 PAT / Net Sales 4.3 4.6 5.0 5.7
Gross Block 2,491 2,712 2,962 3,212 Return Ratios
Less: Acc. Dep 1,328 1,537 1,762 2,006 RoE 9.0 12.3 13.6 15.4
Net Block 1,163 1,175 1,200 1,206 RoCE 17.9 20.1 23.1 26.2
Capital WIP 22 40 40 40 RoIC 17.3 21.6 24.8 27.9
Total Fixed Assets 1,185 1,215 1,240 1,246
Investments 1,095 1,286 1,286 1,286 Valuation Ratios
EV / EBITDA 14.6 11.7 9.2 7.4
Inventory 1,078 1,434 1,673 1,923 P/E 34.9 31.5 19.0 14.5
Sundry Debtors 2,945 2,791 3,461 3,980 EV / Net Sales 1.5 1.1 0.9 0.8
Loans & Advances 372 369 519 597 Market Cap / Sales 1.4 1.1 0.9 0.8
Cash & Bank 646 1,044 1,116 1,140 Price to Book Value 3.1 2.9 2.6 2.2
Other Current Assets 7,514 8,382 9,635 11,079
Total Current Assets 12,554 14,019 16,403 18,720 Turnover Ratios
Asset turnover 1.8 2.4 2.4 2.6
Trade Payable 4,823 6,117 7,032 8,086 Debtors Turnover Ratio 4.5 6.6 6.1 6.1
Provisions 129 150 173 199 Creditors Turnover Ratio 2.8 3.0 3.0 3.0
Other Curr.Liabilities 3,346 3,251 3,737 4,297
Total Curr. Liabilities 8,298 9,518 10,942 12,582 Solvency Ratios
Net Current Assets 4,256 4,501 5,462 6,138 Net Debt / Equity 0.1 (0.0) (0.0) (0.1)
Current Ratio 1.4 1.4 1.4 1.4
Application of Funds 7,254 7,759 8,745 9,426 Quick Ratio 1.3 1.2 1.2 1.2
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 2
Company Update | NCC Ltd. ICICI Direct Research
RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to
its stocks according to their notional target price vs. current market price and then categorizes them as Buy,
Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is
defined as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%
ICICI Direct Research Desk,
ICICI Securities Limited,
Third Floor, Brillanto House,
Road No 13, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]ICICI Securities | Retail Research 3
Company Update | NCC Ltd. ICICI Direct Research
ANALYST CERTIFICATION
I/We, Bhupendra Tiwary, CFA, MBA (Finance), Hammaad Ahmed Ulde, MMS (Finance), Research Analysts Research Analysts, authors and the names subscribed to this report,
hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our
compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this
report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the
companies mentioned in the report.
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ICICI Securities | Retail Research 4
