Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Buy
NCC Limited (NCCL.BO)
Return Potential: 36% Equity Research
4 reasons why we like NCC in the mid-cap construction space; Buy
Source of opportunity
Despite a subdued FY11 with 6% yoy revenue growth (vs. last 3 yr. CAGR
of 13%) and order inflow growth of -23%, we reiterate our Buy on NCC due
to (1) a well diversified order book (9 sub-sectors) having exposure to all
growth areas of infrastructure, (2) order book coverage in excess of 2.7X
forward sales, (3) low equity requirement for FY12 (Rs 2.5bn of equity
commitment) and (4) attractive valuations (0.85X P/B vs. long term
historical median of 1.7X). Concerns on increasing working capital and
leverage remain but we think current valuations more than factor this in.
The stock is down 39% ytd. vs. Sensex down 10% over the same period.
Catalyst
We expect the full commissioning of Western UP Tollway over the
medium term to generate Rs 2.4 mn toll per day vs. the current Rs 1.8 mn
being tolled.
Financial closure of the NCC power plant which is scheduled over the next
2-3 months should re-enforce confidence in the company’s ability to raise
finance and help it to start work on the project site for timely
commissioning of the power plant.
Valuation
We cut our EPS for FY12-13E by 10-18% on the back of lower than
expected order inflow in FY11 and higher interest expenses. We reduce
our 12-m SOTP based TP to Rs 118 (from Rs 138 earlier) on the back of (1)
earnings cut, (2) taking down multiple of construction business from 11X
to 10X in line with other E&C stocks and (3) adding the value of equity
invested in the NCC Power plant. The stock trades at 12-m fwd P/E of 11X
and P/B of 0.85X which is a 50% discount to its long term median.
Key risks
Further increase in working capital requirement and further delay in
improvement of order inflow.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Buy
NCC Limited (NCCL.BO)
Return Potential: 36% Equity Research
4 reasons why we like NCC in the mid-cap construction space; Buy
Source of opportunity
Despite a subdued FY11 with 6% yoy revenue growth (vs. last 3 yr. CAGR
of 13%) and order inflow growth of -23%, we reiterate our Buy on NCC due
to (1) a well diversified order book (9 sub-sectors) having exposure to all
growth areas of infrastructure, (2) order book coverage in excess of 2.7X
forward sales, (3) low equity requirement for FY12 (Rs 2.5bn of equity
commitment) and (4) attractive valuations (0.85X P/B vs. long term
historical median of 1.7X). Concerns on increasing working capital and
leverage remain but we think current valuations more than factor this in.
The stock is down 39% ytd. vs. Sensex down 10% over the same period.
Catalyst
We expect the full commissioning of Western UP Tollway over the
medium term to generate Rs 2.4 mn toll per day vs. the current Rs 1.8 mn
being tolled.
Financial closure of the NCC power plant which is scheduled over the next
2-3 months should re-enforce confidence in the company’s ability to raise
finance and help it to start work on the project site for timely
commissioning of the power plant.
Valuation
We cut our EPS for FY12-13E by 10-18% on the back of lower than
expected order inflow in FY11 and higher interest expenses. We reduce
our 12-m SOTP based TP to Rs 118 (from Rs 138 earlier) on the back of (1)
earnings cut, (2) taking down multiple of construction business from 11X
to 10X in line with other E&C stocks and (3) adding the value of equity
invested in the NCC Power plant. The stock trades at 12-m fwd P/E of 11X
and P/B of 0.85X which is a 50% discount to its long term median.
Key risks
Further increase in working capital requirement and further delay in
improvement of order inflow.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
No comments:
Post a Comment