HSBC retains `Overweight’ rating on Nagarjuna Construction
HSBC retains `Overweight’ rating on Nagarjuna Construction with a target price of Rs 186.
By ET Bureau |
RESEARCH:HSBC
RATING:OVERWEIGHT
CMP: RS 159
HSBC retains `Overweight’ rating on Nagarjuna Construction with a target price of Rs 186. NCC reported sales of Rs 1,190 crore and net profit of Rs 47.8 crore (32% y-o-y growth). While net profit was 3% below consensus estimates, it was in line with the expectations. Sales accelerated after three consecutive quarters of weak growth and management has guided for about 40% y-o-y growth in Q4.
HSBC’s estimates factor in about 38% y-o-y sales growth, which should drive earnings growth of about 70% y-o-y . NCC has revised its FY10 order inflow guidance from Rs 6,300 crore for FY10 to Rs 7,500-8 ,000 crore. HSBC consequently has revised its FY12 sales up by 3.1% and earnings by 4.8%.
HSBC also expects the company to potentially win Rs 1,200-1 ,800 crore of new road projects. Both the road and the power segment could add Rs 2,700-3 ,800 crore of new order inflows, which could act as growth triggers. The target price of Rs 186 is a sum-of-the-parts consisting of Rs 139 of the core construction business (15x FY11 earnings) and Rs 46 for its subsidiaries.
RATING:OVERWEIGHT
CMP: RS 159
HSBC retains `Overweight’ rating on Nagarjuna Construction with a target price of Rs 186. NCC reported sales of Rs 1,190 crore and net profit of Rs 47.8 crore (32% y-o-y growth). While net profit was 3% below consensus estimates, it was in line with the expectations. Sales accelerated after three consecutive quarters of weak growth and management has guided for about 40% y-o-y growth in Q4.
HSBC’s estimates factor in about 38% y-o-y sales growth, which should drive earnings growth of about 70% y-o-y . NCC has revised its FY10 order inflow guidance from Rs 6,300 crore for FY10 to Rs 7,500-8 ,000 crore. HSBC consequently has revised its FY12 sales up by 3.1% and earnings by 4.8%.
HSBC also expects the company to potentially win Rs 1,200-1 ,800 crore of new road projects. Both the road and the power segment could add Rs 2,700-3 ,800 crore of new order inflows, which could act as growth triggers. The target price of Rs 186 is a sum-of-the-parts consisting of Rs 139 of the core construction business (15x FY11 earnings) and Rs 46 for its subsidiaries.
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