Q3FY24 Review: NCC: Strong execution; healthy balance sheet

9 Feb 2024 , 01:48 PM

NCC posted strong 43% YoY revenue growth and 10.1% Ebitda margin in Q3FY24. With 37% revenue growth in 9M NCC is well set to post 33% growth for FY24. Healthy Rs574bn order book provides strong growth visibility for FY25-26 with minimal disruptions likely from new governments in three states and also from upcoming central elections. Importantly focus on WC control is visible in stable debt at Rs14.7bn despite QoQ revenue growth. Analysts of IIFL Securities raise FY24 estimates by 16% and raise their TP to ₹275 (15x FY26 EPS). BUY. 

Strong performance in Q3FY24: 

NCC beat estimates in Q3 with revenue growth of 43% YoY (11% QoQ) and Ebitda margin of 10.1%. Execution was supported by buildings, electrical and JJM projects (where execution has picked up). Following 37% YoY revenue growth in 9MFY24, management guided to ~25% YoY revenue growth for Q4 implying full year growth expectation of ~33%. PBT growth at 37% was in-line with Ebitda growth with depreciation and finance charges largely stable QoQ while other income was lower YoY on a high base. 

Order book of Rs574bn provides strong growth visibility: 

Q4 order inflow at Rs8bn was tepid resulting in order book declining QoQ to Rs574bn (3.4x trailing book to bill). Mgmt indicated that the company is the L1 in orders worth Rs12.5bn and expects to win further orders of ~Rs40bn over Feb-Mar to reach overall order inflow of Rs260bn in FY24. Company does expects no disruption to execution from the recent state government changes and the upcoming central elections and should see healthy growth backed by the large Rs574bn order book. 

WC under control; healthy balance provides comfort: 

Working capital levels were largely stable in Q3 vs end H1 levels which aided in a stable gross debt at Rs14.73bn. Receipt of second instalment of Rs520m from sale of NCC Vizag Urban also helped. Incrementally, company has an equity commitment of ~₹2bn over three years for the two smart metering projects under SPV of which company expects to infuse an equity partner for ~₹1bn. Overall, debt levels should continue to remain stable providing strong comfort.