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NCC 4QFY2014 performance highlights and results update

May 23, 2014, Friday, 13:00 GMT | 08:00 EST | 16:30 IST | 19:00 SGT
Contributed by Angel Broking

For 4QFY2014, NCC reported a mixed performance with a better-than-expected top-line (Rs.1,913cr vs our expectation of Rs.1,840cr due to pick up in execution) but a lower-than-expected operational performance (OPM at 5.5% vs our expectation of 8.4%, mainly due to one-off provisions). The company secured orders worth Rs.9,385cr in FY2014 taking the current outstanding order book to Rs.20,956cr (3.4x trailing revenues).

Modest top-line performance, however, weak operational performance: On the top-line front, NCC reported a growth of 9.9% yoy to Rs.1,913cr. This is mainly due to pick up in execution in under construction projects during the quarter. On the operating front, the company’s EBITDA margin stood at 5.5%, down 354bp yoy, mainly due to one-off adjustment related to provisions for higher expenses booked in a couple of old projects. The interest cost came in at Rs.143cr, indicating a growth of 26.9% yoy. At the bottom-line level, the company reported a profit of Rs.32cr, in spite of weak operational performance and high interest cost, due to higher other income and tax benefits.

Outlook and valuation: During the quarter, NCC has pared down its debt by Rs.250cr to Rs.2,470cr. The company is also in process of further reducing its debt through stake sale in two of its road BOT projects (Western UP Tollways and Bangalore Elevated Expressway), continued monetization of its land bank and completion of stake sale in the Himachal Sorang project and Nelcast Power Project. The company has already reached a definite agreement with Sembcrop Utilities Pte ltd in 3QFY2014 for 45% stake sale in Nelcast Power Project for Rs.470cr, which is expected to be monetized over the next nine months, subject to approval of Coal Ministry. Further, NCC has an order book of Rs.20,956cr as of 4QFY2014, indicating order book to sales of 3.4x trailing revenues, which provides comfort on the revenue visibility front. Hence, we recommend Accumulate rating on the stock with a target price of Rs.90.