Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

Maintain BUY on NCC - Execution recovery awaited - HDFC Securities

Posted On: 2020-06-01 17:51:23

Ms. Parikshit D Kandpal, Institutional Research Analyst, HDFC Securities.

NCC (Q4FY20 Results Review): Margin recovery holds the key. Maintain ADD

NCC Ltd. reported 4QFY20 PAT at Rs 1.1bn, down 36% YoY. Adjusting for exceptional items, APAT stood at Rs 1.0bn, beating our estimate by 27%. Although revenue missed our estimates, beat on PAT was largely driven by a) EBITDA margin expansion on favourable mix of projects b) lower depreciation, interest cost and taxes. FY20 revenue stood at Rs 82bn, down 32% YoY on back of removal AP works from order book. Order inflow also remained tepid in FY20 falling 63% YoY. We expect slower execution to continue in FY21 given Covid-19 led lockdown in 1QFY21. We maintain BUY with SOTP of Rs 48/sh as current valuation already price in weak execution.

Covid-19 slows down execution further: During 4QFY20, NCC recorded revenue of Rs 21bn, taking FY20 total at Rs 82bn (vs Rs120bn in FY19 and flattish guidance for FY20, later revised to Rs 90bn in 3QFY20). Covid-19 led lockdown impacted execution in the second half of Mar-20 and NCC expects 1QFY21 to also be severely impacted. Although management shied away from providing revenue guidance, NCC was able to start work on 90% of the projects as they had retained labor force at key construction sites. We remain conservative and build in Rs 70bn of revenue in FY21 factoring in slower execution. EBITDA margin expanded by 75bps in FY20 despite slower execution on back of favorable mix of higher margin road, water and mining projects. We expect EBITDA margin to contract by 142 bps in FY21 on fixed cost absorption on lower revenue base.

Orderbook at Rs265bn: NCC had Rs 265bn of order backlog as of FY20 end (ex. slow moving/cancelled AP orders, AP - Rs 45bn order book). About 50% of the order book is in buildings and 17% in water. Rest is distributed among road, electrical, irrigation, mining, international and others. Management believes ordering activity to pick up from 2QFY21 as govt. tries to kick start economy. We build in Rs 60/100bn orders for FY21/FY22.

Balance sheet position comfortable: Although receivables reduced to Rs 26bn from Rs32bn YoY, debtors days increased to 107 days from 92 days on tepid execution. NWC increased from 107 to 157 on low rev base. Debt stood at Rs 20bn with D/E ratio of 0.37x which we believe is comfortable. NCC has not availed loan moratorium relief as of now, but has shown interest in doing so as interest on term loan created would be low and this would also help in cashflow management.

We maintain BUY on NCC with TP of Rs 48/sh as 1) current valuation more than factors in weak execution 2) improved visibility on net executable order book after removal / descoping of AP orders and 3) positive surprise on order wins as NCC looks to replenish the order book. Key risks to our estimates 1) Deterioration in NWC days & 2) Weak real estate monetization.

Shares of NCC Limited was last trading in BSE at Rs.25.6 as compared to the previous close of Rs. 23. The total number of shares traded during the day was 3378666 in over 4959 trades.

The stock hit an intraday high of Rs. 26.9 and intraday low of 23.9. The net turnover during the day was Rs. 88048555.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Real Estate (Sector Update) - Greenshoots visible - HDFC Securities

Cement (Sector Update) - Prices, retail sales hold up despite COVID - HDFC Securities

TCI Express - Branch economics, cost levers as margin tailwinds - ICICI Securities

Mishra Dhatu Nigam - Space order inflow may slow down in FY21 - ICICI Securities

Century Plyboards - Compelling BUY; top pick in building materials - ICICI Securities

Building material - Sector Update - ICICI Securities

ISGEC Heavy Engineering - On a strong footing despite macro headwinds - ICICI Securities

Telecom - Growth breaks due to Covid-19 crisis - ICICI Securities

Pfizer Ltd - Company Update - ICICI Securities

Petronet LNG - Quant Pick - ICICI Securities

Earnings Wrap Q4FY20: Quarter end lockdown takes toll, one-offs rule Q4FY20

Autos & Transportation Sector Update Report - Focus on '3Cs' - HDFC Securities

Banking Sector Credit Trends - Weakness building - HDFC Securities

India Equity Strategy Report - Back to pre-covid levels - HDFC Securities

Strategy: Cyclicals to lead earnings recovery over FY20-22 - ICICI Securities

JK Cement - Ripe for re-rating - ICICI Securities

Phillips Carbon Black - Company Update - ICICI Securities

Information Technology - Q1FY21 Result Preview - ICICI Securities

Motherson Sumi Systems Ltd - Company Update - ICICI Securities

HDFC Ltd - Quant Pick - ICICI Securities

Auto Sales Data for June 2020 - Angel Broking

FMCG - Sector Review 4QFY20 - Disruption visible, growth divergence increases - HDFC Securities

Maintain ADD on ONGC - Impairment loss drags earnings - HDFC Securities

Maintain BUY on Ahluwalia Contracts - Looking ahead - HDFC Securities

RIL-Intel Deal - Angel Broking

Strategy: 'Out of turn' change in NIFTY50 due to Vedanta delisting - ICICI Securities

Time Technoplast - Q4FY20 Result Update - ICICI Securities

Monthly Auto Volumes - July 2020 - ICICI Securities

Oil & Natural Gas Corporation - Q4FY20 Result Update - ICICI Securities

Minda Industries - Q4 FY20 Result Update - ICICI Securities

Auto Sales - June 2020 - Acuité Ratings & Research

Bharat Electronics - Q4FY20 Result Update - ICICI Securities

Petronet LNG - Q4FY20 Result Update - ICICI Securities

Tata Steel - Q4FY20 Result Update - ICICI Securities

Phoenix Mills - Q4FY20 Result Update - ICICI Securities

Jun-20 Volumes expectations: Sales to rise over 2x from May-20 levels for Hero, Maruti - HDFC Securities

Maintain REDUCE on RBL Bank - Risks more evident - HDFC Securities

Maintain ADD on Subros - Expect market share gains to continue - HDFC Securities

Maintain ADD on Petronet LNG - One offs in opex drag profitability - HDFC Securities

Siyaram Silk Mills - Company Update - ICICI Securities

Vardhman Textiles - Company Update - ICICI Securities

Bharat Forge - Q4FY20 Result Update - ICICI Securities

CESC - Q4FY20 Result Update - ICICI Securities

Star Cement - Company Update - ICICI Securities

BUY on GIC Reinsurance - Arduous Road Ahead - HDFC Securities

ADD on Oil India - Excess provisions drag EBITDA - HDFC Securities

Maintain BUY on Sobha - Well placed for recovery - HDFC Securities

Maintain REDUCE on Emami - Miss on all fronts - HDFC Securities

BUY on Galaxy Surfactants - Higher per unit EBITDA leads profitability - ICICI Securities

Maintain BUY on J. Kumar Infraprojects - Migration headwinds - HDFC Securities

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019