Target: ₹278
CMP: ₹208.60
NCC had fallen 38 per cent from its peak in the past eight months due to delayed payments by government projects. This had led to execution challenges, a rise in debt and downgrade in revenue and EBITDA guidance.
However, in the past few days, the company has witnessed a strong uptick in order awarding, led by inflows worth ₹15,000 crore (from Bharat Sanchar Nigam for BharatNet infrastructure in Uttarakhand and Madhya Pradesh) in Q4FY24 which is higher than ₹13,600 crore in 9MFY24, taking the total inflows for the year to about ₹28,600 crore, outperforming the guided ₹20,000-22,000 crore.
Also, expect the traction in order awarding activity to continue as Andhra Pradesh witnessing pickup in momentum and NCC had been a key beneficiary in the previous regime of the same state government. The recently announced State budget for Andhra Pradesh is targeting a 69 per cent increase in capital expenditure in FY26 to ₹40,200 crore(highest ever), which is the sharpest growth amongst among all the States.
On the back of strong inflows and better revenue visibility, we believe the stock price trend for NCC is set to reverse. So, we upgrade it to Buy with TP raised to ₹278 on FY27E P/E of 15x (unchanged).
