NCC shares have been performing exceptionally well on Dalal Street, mainly due to a decline in key raw material costs, significant order wins, and improving financials.
In just under two months, the stock delivered a return of nearly 31% to its shareholders. Over the last six months, the stock has seen a significant increase in value, rising from ₹73.80 apiece to ₹116.20, thus generating a return of 57.45%.
This recent rally in the stock has resulted in a massive return of 372% in the last three-year period. Furthermore, the stock is currently trading 122% higher than its one-year low of Rs. 52.2 per share.
On April 01, the company announced that it had received orders worth ₹1,919 crore in March 2023. In the preceding months, the company received three new orders amounting to ₹2,374 crore in February and four new orders worth ₹1,755 crore in January.
NCC is one of the largest infrastructure conglomerates in India, with a presence across all major construction segments such as building and housing, roads, water and environment, irrigation, metals, mining, and railways.
In its recent note, domestic brokerage firm IDBI Capital initiated coverage on the stock with a 'buy' tag and a target price of ₹146 apiece, signalling an upside of 25.65% from the stock's previous closing price.
The brokerage stated that NCC has a strong track record in executing infrastructure projects and has seen multiple capex cycles in India. It anticipates that the upcycle in NCC's order inflow will persist in FY23E, driven by the government's sustained emphasis on infrastructure spending.
The company's execution has demonstrated weaknesses over the past 5-7 years, but there have been visible improvements since FY22. In FY23E, the brokerage expects NCC to exceed its historical best revenue of FY19 by 5-7%, and with its existing orders, it projects the company's revenue to increase by approximately 20% per annum over FY24E/25E.
NCC could benefit from two sector tailwinds that may aid margin and topline. The first is the weakness in commodity prices, such as steel, bitumen, crude, and diesel, and the second is the government's infrastructure spending and initiatives, such as JJM, Gati Shakti, Bharat Mala, PMAY, and Metro, according to IDBI Capital.
During the October-December quarter of FY23, the company clocked a consolidated net profit of ₹168 crore, a rise of 100% YoY. The revenue from operations during the same quarter came in healthy at ₹3,850 crore, an increase of 27.69% compared to ₹3,015 crore in Q3 FY22. Sequentially, the revenues were up by 14.14%.
The operating profit jumped by 36.23% YoY to ₹376 crore from ₹276 crore in Q3 FY22. The EPS improved to ₹2.51 from ₹1.25 in Q3 FY22 and from ₹2.09 in Q2 FY23.
The company's standalone debt during Q3FY23 has declined by ₹39 crore on a QoQ basis to ₹1,946 crore, given the improved collection momentum.
At the end of Q3FY23, NCC's order book on a standalone basis was at an elevated level of ₹39,863 crore.
12 analysts polled by MintGenie on an average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.