Shares of NCC, a leading construction and infrastructure firm, continued their upward trend for the third consecutive trading session on Thursday. The stock had a good start to the trade, opening at ₹98.85 apiece, compared to the previous close of ₹97.70, and surged further to mark a new 52-week high of ₹102, up by 4.4%.
The company's shares gained momentum on March 01, after NCC in an exchange filing said that it had received three new orders aggregating ₹2,374 crore in the month of February 2023.
According to the company, one of the three orders, worth ₹1,224 crore, was related to transportation. The second order, worth ₹830 crore, was related to the water and environment division, while the third order, worth ₹320 crore, was related to the mining division.
NCC is one of the leading construction companies in India, with a presence across varied verticals of the infrastructure space like buildings, roads, water mining, and electrical.
The stock has gradually increased since hitting a 52-week low of ₹52.2 apiece in June last year, and it is currently trading at a level that is 91.5% higher than its one-year low.
Despite such strong performance in a volatile market, domestic brokerage firm ICICI Direct Research has maintained its bullish outlook on the stock following the company's December quarter numbers.
During the October-December quarter of FY23, the company clocked a consolidated net profit of ₹168 crore, indicating 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 EBITDA margin expanded by nearly 100 bps to 10% in Q3 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.
Going forward, the company expects its debt to be reduced to ₹1,600–1,700 crore by FY23-end, partly aided by higher profitability and improved collections. Further, receipt of money from NCC Urban monetisation would help in debt reduction, said ICICI Direct.
The brokerage has retained its "buy" rating on the stock with a target price of ₹120 apiece, valuing the stock at 10x FY25 P/E. According to the brokerage, the strong execution, management guidance, and margin improvement have prompted them to raise their earnings estimates.
ICICI Direct has also highlighted the key drivers for future performance. These include the company's strong positioning to take advantage of a massive infrastructure pipeline and the continued momentum in awarding new projects, which is expected to result in healthy order inflows.
Furthermore, the company's strong order book is expected to ensure top-line growth with a CAGR of 17.6% over the period of FY22–25E. Along with this, there is a likelihood of improving margins to 10.5%.
The company is also focusing on monetizing its non-core subsidiaries, which is expected to bring in additional cash flows and the unwinding of receivables to provide a liquidity boost; strengthening the balance sheet likely with the gradual decline in debt, said the brokerage.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
