Buy NCC, target price Rs 335: HDFC Securities

HDFC Securities has a buy call on NCC with a target price of Rs 335. The current market price of NCC is Rs 196.25 . NCC, incorporated in the year 1990, is a Mid Cap company with a market cap of Rs 12208.48 crore) operating in the construction sector.

NCC's key products/revenue segments include Income From Contracts and Other Operating Revenue for the year ending 31-Mar-2024.



Financials
For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 5382.86 crore, up 3.03% from last quarter Total Income of Rs 5224.36 crore and up 1.80% from last year same quarter Total Income of Rs 5287.74 crore. The company has reported net profit after tax of Rs 195.75 crore in the latest quarter.

The company's top management includes Mr.Hemant M Nerurkar, Mrs.Uma Shankar, Dr.A S Durga Prasad, Mrs.Renu Challu, Mr.O P Jagetiya, Mr.Utpal Sheth, Mr.A V N Raju, Mr.J V Ranga Raju, Mr.A S N Raju, Mr.A G K Raju, Mr.A A V Ranga Raju, Mr.Ramesh Kailasam. The company has S R Batliboi & Associates LLP as its auditors. As on 31-12-2024, the company has a total of 63 crore shares outstanding.

Investment Rationale
NCC reported an in-line performance in Q3FY25, with revenue/EBITDA/PAT beat of 4/0/13.5%. With order inflow of Rs 84 billion (ex of Rs 100 billion L1) during the quarter, OB as of FYTD25 stands at Rs 555 billion (~3x FY24 revenue). On the back of slower L1 awards, muted collection in water segment and electionrelated slowdown, NCC has downgraded its FY25 revenue growth guidance to 5% vs. 15% earlier and EBITDA margin guidance to 9.25% vs. 9.5%. However, the margin trajectory is required to be monitored due to excessive competitive pressure. NCC expects that it shall meet its guided order inflows of >Rs 200- 220 billion (25% decline YoY) for FY25, with inflows of Rs 236 billion including L1 already in place. Prospects pipeline is Rs 2.1 trillion which will add further to OB. Standalone gross debt increased by Rs 6 billion QoQ to Rs 24.2 billion, due to a slowdown in payments from clients, given the elections. Given the weak execution, HDFC Securities has recalibrated its estimates lower. They maintain a BUY with a reduced target price of Rs 335/sh (16x Dec-26E EPS).

Promoter/FII Holdings
Promoters held 22.02 per cent stake in the company as of 31-Dec-2024, while FIIs owned 18.13 per cent, DIIs 14.17 per cent.