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NJCC (NGRJF, Buy)
Bear Case: What can go wrong
In the Bear markets, delay in capex could slow down order inflows. We
assumed 17% fall in FY13E order inflows and 11% growth in FY14E inflows.
Further, order execution to slow down, hence, cut execution rate by 20%
over FY13-14E.
Consequently, we estimate 12%YoY fall in FY13E sales and 4% growth in
FY14E. Further assumed 10-20% higher debtor days in FY13-14E.
We expect margin to fall by 50bps to ~9.2% over FY13-14E (vs 9.8% in
FY12E). Further, expect 25-50bps higher interest rate in FY13-14E.
Consequently, we expect 68-71% cut in base EPS over FY13-14E leading to
decline in earnings at -28% CAGR over FY11-14E.
In Bear markets, we expect parent business to de-rate and trade at lower PE
multiple of 5x (60% discount to E&C major). Further, write off NCC Power
from the valuation as it may not get equity to fund project and raised holdco
discount to 50% for NCC Urban and 30% to other subsidiaries value..
Base Case:
In the Base case, we assumed the order inflows to grow at 18%YoY in
FY13E and 11% in FY14E.
We estimate sales growth of 18%YoY in FY13E and 8% in FY14E. Further,
assume, margin to remain flat at ~9.7% over FY12-14E
Consequently, we estimate an EPS CAGR of 6% over FY11-14E.
In the base case, we expect parent business to de-rate & trade at PE
multiple of 6x (7x) 1-year forward (~55% discount to E&C major).
To factor in de-rating of sector / stock multiple, we cut our PO by 11% to
Rs95/sha re valuing stock at 0.93x P/BV of FY13E.
Risk-Reward: Favorable but only in risk-on mkt
In the bear case, we expect the stock could trade at Rs46/share valuing at
0.47x FY13E parent P/BV.
In the base case, we expect the stock could trade at Rs95/share valuing at
0.93x FY13E parent P/BV.
Overall, the risk-reward appears favorable
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
NJCC (NGRJF, Buy)
Bear Case: What can go wrong
In the Bear markets, delay in capex could slow down order inflows. We
assumed 17% fall in FY13E order inflows and 11% growth in FY14E inflows.
Further, order execution to slow down, hence, cut execution rate by 20%
over FY13-14E.
Consequently, we estimate 12%YoY fall in FY13E sales and 4% growth in
FY14E. Further assumed 10-20% higher debtor days in FY13-14E.
We expect margin to fall by 50bps to ~9.2% over FY13-14E (vs 9.8% in
FY12E). Further, expect 25-50bps higher interest rate in FY13-14E.
Consequently, we expect 68-71% cut in base EPS over FY13-14E leading to
decline in earnings at -28% CAGR over FY11-14E.
In Bear markets, we expect parent business to de-rate and trade at lower PE
multiple of 5x (60% discount to E&C major). Further, write off NCC Power
from the valuation as it may not get equity to fund project and raised holdco
discount to 50% for NCC Urban and 30% to other subsidiaries value..
Base Case:
In the Base case, we assumed the order inflows to grow at 18%YoY in
FY13E and 11% in FY14E.
We estimate sales growth of 18%YoY in FY13E and 8% in FY14E. Further,
assume, margin to remain flat at ~9.7% over FY12-14E
Consequently, we estimate an EPS CAGR of 6% over FY11-14E.
In the base case, we expect parent business to de-rate & trade at PE
multiple of 6x (7x) 1-year forward (~55% discount to E&C major).
To factor in de-rating of sector / stock multiple, we cut our PO by 11% to
Rs95/sha re valuing stock at 0.93x P/BV of FY13E.
Risk-Reward: Favorable but only in risk-on mkt
In the bear case, we expect the stock could trade at Rs46/share valuing at
0.47x FY13E parent P/BV.
In the base case, we expect the stock could trade at Rs95/share valuing at
0.93x FY13E parent P/BV.
Overall, the risk-reward appears favorable
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