Bank of America recommends 'buy' on Nagarjuna Constructions
Nagarjuna Constructions (NJCC) won its biggest order worth Rs 1,800 crore (US$387 million) from the Govt. of Oman, for the construction of 240 km of roads to be completed in 24 months.
By ET Bureau |
NAGARJUNA CONSTRUCTION
RESEARCH: BANK OF AMERICA
RATING:BUY
CMP: RS 178
Nagarjuna Constructions (NJCC) won its biggest order worth Rs 1,800 crore (US$387 million) from the Govt. of Oman, for the construction of 240 km of roads to be completed in 24 months. This adds 13% to the consolidated Q1FY10 order backlog and boosts Middle East revenue visibility. Bank of America raises the target price to Rs 189 to factor in valuation of its international construction subsidiaries at Rs 30 per share. NJCC's outlook for FY10E is better with order inflows of Rs 4,400 crore (Rs 2,600 crore in H1FY10 YTD) - 81% of FY09 inflows of Rs 5,400 crore led by international (41%), building (24%), irrigation (20%), water (7%), road (5%) and electrical (4%). However, Middle East orders expose NJCC to higher fixed priced contracts, apart from lower EBITDA margin versus domestic orders. However, lower tax rate (12%) should support net margins. We also factor in raising of Rs 370 crore through QIP to repay its short-term debts and sale of its minority stake in Gautami power to GVK. NJCC is on track to acquire value accretive infra assets across power, roads, ports and realty sectors.
RESEARCH: BANK OF AMERICA
RATING:BUY
CMP: RS 178
Nagarjuna Constructions (NJCC) won its biggest order worth Rs 1,800 crore (US$387 million) from the Govt. of Oman, for the construction of 240 km of roads to be completed in 24 months. This adds 13% to the consolidated Q1FY10 order backlog and boosts Middle East revenue visibility. Bank of America raises the target price to Rs 189 to factor in valuation of its international construction subsidiaries at Rs 30 per share. NJCC's outlook for FY10E is better with order inflows of Rs 4,400 crore (Rs 2,600 crore in H1FY10 YTD) - 81% of FY09 inflows of Rs 5,400 crore led by international (41%), building (24%), irrigation (20%), water (7%), road (5%) and electrical (4%). However, Middle East orders expose NJCC to higher fixed priced contracts, apart from lower EBITDA margin versus domestic orders. However, lower tax rate (12%) should support net margins. We also factor in raising of Rs 370 crore through QIP to repay its short-term debts and sale of its minority stake in Gautami power to GVK. NJCC is on track to acquire value accretive infra assets across power, roads, ports and realty sectors.
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