scorecardresearchBrokerages see up to 67% upside in this midcap infra stock

Brokerages see up to 67% upside in this midcap infra stock

Updated: 16 Aug 2022, 03:59 PM IST
TL;DR.

The stock has also not performed in long-term investments. It lost 5.54 percent in the past 3 years, and 21.97 percent in the past 5 years.

The stock has also not performed in long-term investments. It lost 5.54 percent in the past 3 years, and 21.97 percent in the past 5 years.

The stock has also not performed in long-term investments. It lost 5.54 percent in the past 3 years, and 21.97 percent in the past 5 years.

2022 has been a very volatile year for midcap infra stock NCC. In the 8 months of the calendar year, the stock has given positive returns in 4 of these and negative returns in the remaining 4.

However, overall, the stock has lost over 5 percent in 2022 so far and 22 percent in the last 1 year. But in August so far, the stock has advanced nearly 12 percent on the back of strong June quarter results.

The stock has also not performed in long-term investments. It lost 5.54 percent in the past 3 years, and 21.97 percent in the past 5 years.

Despite that brokerages now see up to 67 percent upside in the stock from its current market price of 64.5.

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NCC stock price trend

In the June quarter, the company's net profit surged 159 percent YoY to 129.64 crore from 50 crore in the year-ago period. Its total income also jumped 61 percent to 3,351 crore in Q1FY23 from 2,083 crore in Q1FY22 backed by a strong order book and pick-up in execution.

However, its operating margin in the quarter under review came in at 9.5 percent. down 105 bps YoY due impact of higher raw material prices.

Post the results, domestic brokerage house HDFC Securities retained its buy call on the stock with a target price of 108, indicating a potential upside of 67 percent given the robust order book, pick-up in execution, stable balance sheet, and commodities price correction.

"NCC's Q1FY23 beat our estimates. With an order inflow (OI) of 4,460 crore in Q1FY23, the order book (OB) stood at 40,600 crore. During the quarter, NCC secured a larger order-a major sewage treatment plant order in Mumbai with an EPC component of 3,830 crore and an O&M component of 1,850 crore. The interest coverage ratio stood at 2.88 times. The average cost of debt during the quarter stood at 8.67 percent. Given the robust order book, pick-up in execution, stable balance sheet, and commodities price correction, we maintain BUY on NCC," said the brokerage.

Meanwhile, Anand Rathi also remained bullish on the stock with a target price of 96, indicating a potential upside of 49 percent.

"NCC’s proven execution abilities, once more in the spotlight, allowed it to benefit from its sturdy OB. This is likely to persist as order additions continue to augment its OB and the pace of execution proceeds. The EBITDA margin recovered from recent lows and appears to hold potential as the scale turns better, and the recently added orders (with better margins) contribute more. Cash-flow generation could have been better; but, levers seem to be in place to scale up further without any notably higher debt. On the healthy prospects, we retain our Buy rating," explained Anand Rathi.

NCC is engaged in construction activities in the infra sector. The company carries out the construction of commercial buildings, roads, bridges, water supply & environment projects, housing, power transmission lines and hydrothermal power projects.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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First Published: 16 Aug 2022, 03:59 PM IST