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NCC 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, NCC posted a poor performance on the revenue front; however higher other income due to asset sale and lower tax expense helped boost bottom-line growth. The current outstanding order book of NCC stands at Rs.18,799cr (3.3x trailing revenues), with order inflows of Rs.3,200cr for 9MFY2013.

Strong execution performance offset by high interest burden: On the top-line front, NCC reported a decline of 6.3% yoy to Rs.1,184cr, which was significantly lower than our estimate of Rs.1,427cr. This was mainly due to loss in revenue of Rs.200cr during the quarter on account to slow moving orders. On the EBITDAM front, the company’s EBITDA margins stood at 7.2% (down 116bp sequentially), which were below our estimate of 8.4%. However, on the bottom-line front, NCC reported a PAT of Rs.11cr (in line with our estimate) against a loss of Rs.9cr in 3QFY2012. This was mainly on the back of higher other income owing to asset sale and lower tax expense during the quarter.

Outlook and valuation: For FY2013 the company has given a guidance of 15-20% growth on the revenue front and is hopeful of maintaining the EBITDAM at 8-9%. However based on 9MFY2013 performance we believe it will not achieve its revenue guidance. NCC’s captive power plant is expected to contribute ~Rs.360cr to FY2013 revenues. Further, NCC reduced its debt by Rs.100cr during the quarter to Rs.2,522cr and is in process of reducing its debt to below Rs.2,000cr through stake sale in one of its road BOT project, continued monetization of its land bank, and stake sale in the Himachal Sorang project. The stock currently trades at a PE of 6x and 4.5x (excluding subsidiaries’ valuation) our FY2013 and FY2014 EPS estimates. Further, on account of the stake sale initiated by the company in some of its projects and decline in its stock price, we upgrade our recommendation on the stock to Accumulate.